Credit Cards KrisFlyer

Do Foreign Exchange fees outweigh overseas miles earning rates on your credit card?

A myriad of fees charged by your credit card issuer and the network operator can result in a foreign transaction fee of up to 3.5% being applied to your overseas credit card purchases. Do the extra miles earned offset the increased cost?

Foreign Currency

One major ‘pull’ for many credit cards issued in Singapore is the enhanced miles earning rate for transactions made overseas (or simply transacted in foreign currency, which is the criteria for most cards). Many cards offer attractive headline rates in this category, typically between 2 and 3 miles per S$1 spent.

The question is, since you’ll pay a higher foreign exchange fee with some cards compared to others, does the earning rate you’re receiving for your card make the most sense?

Summary
There’s a fair bit of number-crunching in this article, and a few topics covered, so here’s a summary of our conclusions from the outset.
Credit Card Forex fees vs. Miles earned
Good News for:

  • Standard Chartered Visa Infinite
  • OCBC Voyage Visa
Less Good for:

  • Citi PremierMiles / Citi Prestige
  • DBS Altitude Visa / Amex
Whichever Singapore-issued miles-earning credit card you use…
The KrisFlyer miles awarded almost always outweigh the forex fee, provided you value the miles at 2 cents each. So don’t be afraid to use your card overseas.
If you must use cash overseas
Shop around. Get the best rate you can from a money changer in Singapore. Consider an online delivery service, which won’t cost much more. Most importantly, even if you’re pushed for time, never change money at the airport.
Always insist on paying in local currency
Don’t be tempted to pay in Singapore Dollars when you’re presented with that option overseas – when you receive the bill at a restaurant or hotel for example. Dynamic Currency Conversion (DCC) is a scam. You’ll pay more, and earn less miles, every time. The only one who wins is the merchant.

What fees are applied when I make a purchase in foreign currency?

There are three elements to the calculation when you use your credit card to make a transaction in foreign currency:

  • the foreign exchange “spread”, which comes about because your overseas transaction is first converted into US$ before being converted again to SG$ (unless the transaction was in US$ to start with). Typically 0.8%
  • the foreign exchange fee levied by your card issuer. Typically 1.5-2.5%
  • the foreign exchange fee applied by the card network (Visa, MasterCard or Amex). Typically 1.0%

Card issuers in Singapore hide the details of the last two categories in their terms and conditions documents, and for some cards those categories are combined, making it difficult to directly judge one card against another. We’ve therefore compiled a table of the major credit card issuing banks in Singapore, showing the total foreign exchange fee levied by each one for overseas transactions.

What’s the best rate you can get?

Before we look at the tables, let’s establish the best rate you can achieve for your overseas spending, as that also helps establish the benchmark against which we can judge the additional fees you’ll pay when using a credit card.

There’s actually no escaping at least some currency conversion cost whichever method you pick. Even your favourite money changer in Singapore, who consistently offers the most competitive rates, will still charge a foreign exchange spread. You’ll never achieve the ‘interbank rate’ as a consumer.

We checked the rates offered on 12th February 2018 for four major currencies at XE (the interbank rate you can’t get), a local Singapore money changer, foreign currency delivery service Thin Margin, and the UOB outlet in the transit area at Changi T1.

Singapore Dollars (S$) needed to buy one unit of foreign currency

XE Rate Money Changer Thin Margin UOB Airport Airport Extra
USD 1.326 1.332 1.333 1.356 +1.8%
EUR 1.629 1.635 1.640 1.665 +1.8%
AUD 1.038 1.047 1.049 1.061 +1.3%
GBP 1.838 1.850 n/a 1.868 +1.0%

First thing to note is the extra you’re paying if you choose the worst-case option – changing cash at the airport. This ranged from 1.0% to 1.8% more on the day we checked, compared with the rate you’d get at a money changer downtown.

Foreign Exchange (Travelex)
Changing foreign currency at the airport is the most expensive option. (Photo: Travelex)

You can also see that a good money changer in Singapore is charging an average 0.58% ‘spread’ over the interbank (XE) rate, across these four currencies.

In some cases the card operator (Visa, MasterCard or Amex) will charge a similar spread over the XE rate, but in some cases it can be as high as 0.88%. For the worst-case scenario, we’ve considered in our calculations later that you’ll suffer an extra 0.3% ‘spread’ if you use your credit card for an overseas transaction vs. money changer rates, but it will usually be less than this.

Another interesting point is that the Thin Margin rates are actually quite competitive, only slightly higher than at a money changer but you get the convenience of your currency delivered to your home or office without even having to jump on the MRT.

On the downside, a couple of days notice is needed for the delivery slot, the minimum purchase is S$800, and there is a S$3 delivery charge for conversions less than S$2,000.

Are there any 0% forex credit cards?

It’s interesting to note that unlike cards such as the 28 Degrees Platinum MasterCard in Australia and the Halifax Clarity card in the UK, ‘no forex fee’ credit cards have not yet appeared in Singapore (to our knowledge), and so if you really want to achieve the best rate for your overseas purchases – the old fashioned way is the best. That means using a money changer and converting your SGD into cash before your trip.

That’s a shame because a 0% forex fee credit card, which admittedly forgoes any additional perks like miles, does remove a few of the negative aspects of using cash like the security concern (carrying large amounts of money around foreign cities), and the risk of having unwanted leftover currency at the end of your trip (which you might then be inclined to spend – just for the sake of it).

The closest you can get to this in Singapore is the CIMB Visa Infinite or CIMB Platinum MasterCard, not miles-earning options but only a 1% forex fee is applied.

DBS also offer their Multi-Currency Account which allows forex-free transactions overseas in 12 popular currencies using your DBS Visa Debit card, but you still need to fund your specific currency wallet buy buying online in advance, and have a good idea how much you will need before your trip as a transaction will be declined if you have insufficient funds in that currency.

It does however offer competitive rates, close to those you’ll get at a money changer, without the hassle of visiting one and carrying around large amounts of cash in the process.

Citi offer a similar account, which works for 9 foreign currencies.

Forex rates by card issuer

Total foreign exchange fee levy on overseas credit card transactions
(February 2018)

Card Issuer Visa / Master Amex
Amex N/A 2.5%
CIMB[1] 3.0% N/A
CIMB[2] 1.0% N/A
Citi 2.8% 3.3%
DBS / POSB 2.8% 3.0%
HSBC 2.5% N/A
Maybank[3] 2.5% N/A
Maybank[4] 2.75% N/A
OCBC 2.8% N/A
Standard Chartered 3.5% N/A
UOB[5] 2.8% 3.25%
UOB[6] 3.25% 3.25%

[1] Except Visa Infinite Signature and Platinum MasterCard
[2] Visa Infinite Signature and Platinum MasterCard only
[3] Except Visa Infinite and World MasterCard
[4] Visa Infinite and World MasterCard only
[5] Except PRVI Miles
[6] PRVI Miles cards only

Edit 30th April 2018: Thanks to KP in the comments section for correcting my mistake relating to the forex fees on the CIMB cards. It’s the Visa Signature and Platinum MasterCard which have the lower 1.0% fee, the Visa Infinite is 3.0%.

How do the rates relate to the extra points earned?

If you are using your credit card for overseas spending to take advantage of the higher miles earning rate for these transactions, you are effectively ‘buying’ those miles because the foreign exchange fee levied by your card issuer is over and above what it would have cost if you changed your money before you left at a money changer in Singapore, and then simply paid cash for your overseas transactions.

This assumes of course that the exchange rate has not altered since you left Singapore, which can of course work in your favour or against you if you changed cash in advance of your trip, depending on the direction of the currency shift.

To determine the cost you are paying for each mile by using your card overseas, we used the following method, based on a S$100 purchase (i.e. value assuming money changer cash exchange rate):

UOB PRVI Miles

  • 3.25% foreign exchange fee.
  • 0.3% card operator ‘spread’ over and above Money changer ‘spread’.
  • Total payable $103.55.
  • Points / mile 2.4 = 248 miles.
  • Cost per mile earned: 1.43 cents (¢)

To clarify, this transaction would have cost you S$100 cash, given the exchange rate you would have paid at the money changer before you left Singapore, and the rate has not fluctuated. You are therefore paying an extra $3.55, but earning 248 miles in return.

Applying the same calculation to other popular miles earning cards in Singapore results in the following table, showing cost per mile rates (ordered best to worst) if you use these cards for an overseas transaction.

Cost per mile on overseas credit card transactions by card
(Best to worst, February 2018)

Card Fee Miles per S$ Cost per mile
Standard Chartered Visa Infinite 3.5% 3.0 1.22¢
OCBC Voyage Visa 2.8% 2.3 1.31¢
AMEX KrisFlyer Ascend 2.5% 2.0 1.36¢
HSBC Visa Infinite 2.5% 2.0 1.36¢
Maybank Horizon Visa 2.5% 2.0 1.36¢
UOB PRVI Miles 3.25% 2.4 1.43¢
Citi PremierMiles / Prestige 2.8% 2.0 1.50¢
DBS Altitude Visa 2.8% 2.0 1.50¢
DBS Altitude Amex 3.0% 2.0 1.60¢

Cost per mile also accounts for an additional 0.3% ‘spread’ over money changer currency rates. Miles refer to Singapore Airlines KrisFlyer miles, which we value at about 2 cents each.

Standard Chartered Visa Infinite (SCVI) comes out on top (see our review here), despite having the highest forex fee of the cards we looked at, and that’s down to its very generous 3 miles per S$1 spent overseas earning rate. It equates to paying 1.22 cents per mile earned overseas, compared with using cash at the money changer rate.

Remember for SCVI the 3 miles per S$1 overseas earn rate only applies if you spend at least S$2,000 on the card (either locally or overseas) in each statement cycle, and we have assumed that here.

The next highest overseas earning rate card, UOB PRVI Miles, doesn’t actually fare that well. With an rate of 2.4 miles per S$1 spent, it has a high forex fee of 3.25% (only SCVI is higher, but gives 25% more miles in return). For this card you’re paying 1.43 cents per mile.

At the bottom of the table is the DBS Altitude AMEX card, which charges 3.0% forex fee but only awards 2 miles per S$1 spent overseas, meaning you’re ‘buying’ the miles for 1.60 cents each. Other popular miles earning cards near the bottom of the pack include the Citi PremierMiles, Citi Prestige and DBS Altitude Visa.

What about 4X miles earning credit cards?

In addition to the popular cards we listed above, a few Singapore credit cards have bonus spending categories which award 4 miles per S$1 spent, and many of these also apply for selected overseas transactions. This clearly brings the cost per mile rate down even further, if you don’t mind the hassle of using specific cards for certain transactions.

Here’s a summary of some of the 4X miles earning cards and their categories which work overseas:

  • OCBC Titanium Rewards – 4 miles per S$1 on overseas shopping and all overseas mobile payments
  • Citi Rewards – 4 miles per S$1 on overseas shopping
  • UOB Visa Signature – 4 miles per S$1 on all overseas spend of at least S$1,000 in a statement period, capped at S$2,000

All of these examples are Visa or MasterCard options, and each of these banks apply a 2.8% forex fee, so the cost per mile on overseas transactions is the same for all of them, for spending within the bonus 4 miles per S$1 spending category.

Cost per mile on selected 4X bonus credit card transactions

Card Fee Miles per S$ Cost per mile
4X Miles Cards 2.8% 4.0 0.75¢

That makes using these cards overseas within their respective bonus spending categories a no-brainer, as you’re acquiring miles at just 0.75 cents each which is a steal (even the poorest redemption options, like Scoot vouchers, give you 25% better value than this).

Just be careful to make sure your transaction will definitely fall into one of the valid 4X earning categories, as with these cards the standard earning rate is often very poor. For the OCBC Titanium Rewards card, for example, it drops to just 0.4 miles per S$1 – meaning you’ll be paying a whopping 7.5 cents per mile if you get it wrong!

Cash has its drawbacks

At least some cash in your wallet is a good idea whenever you travel, as credit cards are accepted less widely in many countries for everyday transactions. There are a few drawbacks to changing cash for your entire trip though.

  • Security – even when you travel to ‘safe’ countries, carrying around large volumes of cash is risky, both in terms of theft or possible loss.
  • Unwanted leftovers – You’ll probably end up changing more cash than you need for a foreign trip, to ensure you don’t run out. That can lead to unwanted leftover cash at the end, which you’d then have to convert back into SGD, or possibly worse you may be tempted to spend it for the sake of it.
  • Cash may be unsuitable for large bills, like hotel stays which are not pre-paid. Again, this raises the security concern.
US Dollar Bill
Having some cash on an overseas trip is useful and advisable, but there are drawbacks to carrying large quantities for all your spending.

Dynamic Currency Conversion (DCC)

OCBC_DCCtip
On a trip last weekend, even OCBC (through StarHub) reminded me by SMS about avoiding DCC. Banks get a raw deal from this too, as all the profit goes to the merchant.

We talk a lot about DCC in our credit card reviews, because it’s important to be aware of it especially with is topic – overseas miles earning rates.

It’s very common when settling your overseas hotel bill, for example, to be offered to pay in SGD instead of local currency. This is a terrible idea, because:

  • You’ll suffer financially, even after the credit card foreign exchange fee is accounted for. If you remember the SGD amount you were offered to pay, then pay in local currency instead, once the transaction appears on your credit card statement you’ll generally find they were scamming you, you’d have paid at least 2% more using DCC.
  • You will earn credit card miles at the local spend rate if you accept DCC, because the transaction will take place in SGD, not the local currency.

In other words, you’ll pay more, and lose miles. Always insist on paying in the local currency of the country you are in.

Conclusion

The title of this article is a simple question, do the forex fees charged by your credit card issuer when spending overseas outweigh the miles earned. Well we think a KrisFlyer mile is worth about 2 cents, and so the answer for each card we analysed above is no – they don’t.

You are still better using your card overseas and taking the forex fee hit, because you are always acquiring miles at a cost below value, in our opinion.

However we’ve covered a few other things in this article, so here’s a summary of our main conclusions when it comes to overseas spending for the miles addict.

  • Changing cash before your trip will cost you less, but comes with many drawbacks.
  • Whichever of the above miles earning credit cards you use overseas, the additional cost incurred is always outweighed by the number of miles earned (assuming you value KrisFlyer miles at 2 cents each).
  • If you must use cash overseas, don’t change money at the airport. Take the time to find a competitive rate at a local money changer, or if it’s too much hassle consider Thin Margin, which will still save you plenty over the airport rates.
  • When using your credit card overseas, always insist on paying in the local currency whenever you are offered the choice to settle in SGD. Otherwise you’ll pay more, and lose miles. DCC is a scam, and even the banks are starting to twig.

12 comments

  1. disagree, its only worth it if its 4x miles. for 2x, its only worth it if you redeem biz/first, and even for biz its on the borderline

    1. You definitely need to know what your personal cutoff for buying miles is, but personally we achieved an average of 2.87 cents per mile value from the last 1 million KrisFlyer miles we used (see the analysis here). Admittedly that’s largely redeemed in business class. As I’m almost exclusively using the SCVI card for overseas spending, ‘buying’ the miles at about 1.22 cents each works really well for me.

      The important thing is to be equipped with the cost information for your own credit card, and decide if that’s a price you’re willing to pay.

      1. I think you have answered that when you mentioned “largely redeemed in business class”. If its for economy plus/economy, its very difficult to justify that paying the foreign exchanges is worth it. cheers

      2. Absolutely agree, if you’re redeeming for economy class you should definitely not ‘buy’ miles at more than 1.5 cents each.

  2. 1. Direct Currency Conversion should be Dynamic Currency Conversion ?.
    2. For UOB credit cards, UOB round down to nearest $5. So the spending of S$103.55, you get 240 miles based on $100.00.

    1. Thanks for the heads-up on the typo! Article amended.

      Also appreciate the rounding issue which I did not consider for simplicity, but it will make a difference for some cards. Will get that info incorporated into the article soon.

  3. Fantastic article Andrew! The best article I’ve read on the topic. Small suggestion to make it even better: include the exact math in the table. Currently tough to follow the exact calculation.

    1. Thanks for the feedback Tai. I wanted to make the tables as simple as possible for ease of reading – but I’ll certainly look at how the calculation can be made clearer for all to see!

  4. While there isn’t any pure no-fee card in Singapore, there is a very low profile card that is effectively slightly better: The ICBC Global Travel Mastercard. There is still a 2.5% fee on FX spend, but you get a 3% rebate (no minimum or maximum spend), with the usual exceptions (payments to government, etc) that seem to be standard on Singapore-issued cards. So you end up with a 0.5% net gain on FX spend; if you add that to the cost per mile table you have, the costs do go up a bit, SCBVI to 1.33% for instance. Probably not a deal breaker for you, but it may be for others who have a different travel pattern. The card also offers 1.5% unlimited rebate on local currency spend, no crossborder fees for SGD charged overseas and a 3 year annual fee waiver. I’ve been using it for a few months now, and have not come across any “catches”, other than an unintuitive online banking platform. The call center is in China but the one time I had to call them, my fairly non-routine query was handled well by a CSO who spoke with an accented, but acceptably fluent English.

    Smaller quibble: The CIMB Visa Infinite card imposes a 3% FX fee. It’s the Visa Signature that has the lower 1% fee. Another card with a 1% FX fee is the BOC Visa Infinite.

    1. Interesting info about the ICBC Global Travel MasterCard, thanks for sharing. I’ll take a look and try to incorporate some information about that – possibly net time the analysis is fully updated.

      Also appreciate you pointing out my mistake about the CIMB card fees – you’re right it’s the Signature not the Infinite that has the lower fee. Article has been updated – thanks.

  5. Some other tips for those traveling to somewhat more “exotic” countries. The spreads offered by downtown money changers then become uncompetitive. You can’t blame them – there’s significant risk in holding currencies where there’s little demand from Singaporeans. And many seemingly common currencies – MXP, BRL for instance – are not even stocked. Here’s my strategy in these instances:

    Use credit cards wherever possible. MC/Visa generally do double spreads – converting the spend currency to USD and then USD to SGD. But still, given their volumes, the spreads are not crazy from OE midrate. And really, there’s no convenient way to get anything better. Miles collectors should pick from Andrew’s excellent analysis. Others can’t go wrong with the ICBC MasterCard.

    The problem is in many places credit cards are still not accepted. Getting cash becomes inevitable. One way is to get USD or EUR (depending on where you are traveling to) at a Singapore money changer and then exchanging that at the destination countries. But as always, there’s significant risk in carrying cash and sometimes spreads charged by moneychangers in the destination countries can be ridiculous, even to exchange from common currencies like USD and EUR.

    A safer choice is to use ATM Cards to withdraw local currency. But if your currency is not included in DBS’s MCA, then it gets tougher. Among the big 3, DBS seems to have the lowest charges for foreign withdrawals – a flat $5 per withdrawal on top the 1% spread charged by PLUS/Cirrus ATM networks and the bank’s own 2.65% spread. But that’s still outrageous!

    I use a CIMB ATM card, which only charges the 1% PLUS spread, and no additional flat fee, but the exchange rate I’m charged is not as competitive as the one I get using credit cards. I see it as the least worst of bad choices. (Also note that some ATMs overseas add their own charges for withdrawals – do look around.) CIMB offers a very attractive savings account – CIMB Fastsaver that gives a 1% interest rate as long as you keep more than $1000 and more importantly, no monthly charges for low balances. It does not come with an ATM card automatically but you can ask the bank to issue one and link it for a $10 one time charge. The main downside to the CIMB ATM card is that it is on the PLUS (i.e. Visa) network, but smaller towns and villages in Europe seem to be exclusively on Cirrus (i.e. Mastercard). Always carry a Cirrus backup.

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