5 ms·

Arbitraging credit cards while traveling abroad

24 points by shivpatelssp 11y ago

aianus 11y ago
This would only be arbitraging if you were buying something on one card and returning it on another card. It's not arbitrage if you're not making a profit, it's just saving. Nice cost-comparison tool though :)
- shivpatelssp 11y ago
  Great point! Wrong choice in words; will edit the post to make better sense. Also looks like someone else edited the title of this post on YC. Any idea how to change it back?
edent 11y ago
That's really useful. You might want to take a look at https://supercard.io/ https://supercard.io/ - it's a virtual credit card which chooses the best daily rate for you. I'm on the beta trial and finding it pretty useful.
- ollie87 11y ago
  I use the https://revolut.com/ https://revolut.com/ app, which is awesome as it doesn't change any fees ever.
BonoboBoner 11y ago
Interesting concept let me see his method..scrolling.. oh it is about marketing his app. Unless you invest the money you get from the credit card, isnt his approach just min/maxing your cost to get money?
mburst 11y ago
Why not just get a card without foreign transaction fees?
- chillydawg 11y ago
  Because even with no fees, the rate your card uses to turn USD into whatevers will vary from card to card. If you're not paying an up front transaction fee, you're almost certainly getting rinsed on the rate offered.
- tempestn 11y ago
  Even among cards that generally use the mid market rate, the time they set the rate and their source will often differ, resulting in the differences mentioned in the OP. So if you feel it's worth your time, and if you can get up to date rates, you can still save a bit by using the card with the best rate on a given day.
mburst 11y ago
Why not just get a card without foreign transaction fees?
tempestn 11y ago
Without real-time rates available from multiple networks, this relies on that back-tested effect that the card with the better rate tends to persist for several days; is there a reason to be confident that will continue? Not that there's much risk if it doesn't, but you could well just be wasting your time.
jakozaur 11y ago
Nice trick, though not that practical. 1% of oversee spending may be to little benefit for the cost: 1. Get more than one card with zero foreign transaction fees. Make sure you won't get charged yearly fee on those. 2. On every transaction, check the rate on smarthphone. Oh, you want to buy $3 coffee, let me check my rate to see if I can save $0.03. 3. More cards is more monitoring hassle. Harder to track, more hassle if they get stolen and you need to block them all. Also payback program tracking is much harder. 4. Same with fees and interests. More card is more likely that you miss some payments and get charged interests/overdraft. One incident and you whole savings can go away. Even with autopayment you need to make sure you balance your accounts.
- jannotti 11y ago
  I think, but I'm not sure, that you're overstating the complication. Looking at your four steps: 1. Everyone should have two credit cards. You don't want a single point of failure (mistaken fraud freeze, for example.) 2. You only check every day, not every transaction. 3. Again, I argue you should have two (Visa + Mastercard) 4. Again. You're just trying to make things sound hard by repeating the same thing. So. Have two cards. Make sure they autopay themselves. The only new work is checking the exchange rates once a day.
  - shivpatelssp 11y ago
    @jannotti Couldn't have explained it better! Only clarification I'd make is you can use this for more than two cards.
rmc 11y ago
Less useful if you live in the Eurozone. I travel abroad a lot, and it's still just Euro....
roel_v 11y ago
It's sad that I have to say this in 2015, but the cheapest way to deal with money oversees is to... use cash as much as possible. It's not as convenient (although, everybody takes cash, credit cards - depends on where you go...), but taking a wad of cash for trips <= 1 week or making weekly withdrawals for travels longer than that is usually by far the cheapest option.
- petercooper 11y ago
  Agreed. That's what I've done for the past few years. If you get a good rate ahead of time, you're set. The main reason I do it, though, is I had numerous bad experiences with banks and credit cards blocking me over and over when I went to buy things overseas and I was sick of that - cash is king (if you can cope with the safety aspects).
- steventhedev 11y ago
  I've found that cards get better exchange rates than converting cash. Sometimes several dozen percentage points better. However, if you pull the local currency out of an ATM, you get the card network's exchange rate, and at worst an ATM fee (if any).
  - icebraining 11y ago
    Not in my experience (travelling to Budapest). Withdrawing EUR and converting to HUF in a local shop gave us a better rate than withdrawing HUF directly. Never buy stuff with EUR, though!
- ollie87 11y ago
  Or this: https://revolut.com/ https://revolut.com/
- aianus 11y ago
  As somebody who travels a lot credit cards are much, much cheaper than cash. It's not even close. Banks / exchange shops have commissions (baked into the exchange rate) from 2.5% to 5%. My credit card charges $5 flat fee to take out cash, gives spot forex rates, and gives me 1% cashback on purchases. So if I take out $500 cash and spend $500 directly on the card I pay zero fees versus the $25-$50 in fees I'd spend dealing with $1000 cash.
jackgavigan 11y ago
You also need to factor in any foreign currency fees your card issuer imposes. For example, in the UK, most banks impose a "non-sterling transaction fee" of 2.75-2.99% on transactions in a foreign currency. There's a UK startup called Revolut - www.revolut.com - which allows you to hold GBP, USD and EUR on the same (pre-paid debit) card and convert money between them at mid-market rates, using an app. It's pretty slick - I've literally stood at the counter, converting GBP to USD while the clerk rang up my purchase, then handed the card to the clerk and had the notification hit my phone seconds after he swiped.
- aianus 11y ago
  > You also need to factor in any foreign currency fees your card issuer imposes. He's specifically referring to cards that offer spot forex rates. There are many such options in the U.S.
  - jackgavigan 11y ago
    In the UK, the non-sterling transaction fee is separate from the currency exchange.
learnstats2 11y ago
So in the example, this method costs the user $7 compared to just always using the Visa card. The quoted "savings" are compared to the worst possible case - which can only happen if... you use the suggested app.

24 points by shivpatelssp 11y ago

This would only be arbitraging if you were buying something on one card and returning it on another card. It's not arbitrage if you're not making a profit, it's just saving. Nice cost-comparison tool though :)

shivpatelssp 11y ago
Great point! Wrong choice in words; will edit the post to make better sense. Also looks like someone else edited the title of this post on YC. Any idea how to change it back?

edent 11y ago

That's really useful. You might want to take a look at https://supercard.io/ https://supercard.io/ - it's a virtual credit card which chooses the best daily rate for you. I'm on the beta trial and finding it pretty useful.

ollie87 11y ago
I use the https://revolut.com/ https://revolut.com/ app, which is awesome as it doesn't change any fees ever.

BonoboBoner 11y ago

Interesting concept let me see his method..scrolling.. oh it is about marketing his app. Unless you invest the money you get from the credit card, isnt his approach just min/maxing your cost to get money?

mburst 11y ago

Why not just get a card without foreign transaction fees?

chillydawg 11y ago
Because even with no fees, the rate your card uses to turn USD into whatevers will vary from card to card. If you're not paying an up front transaction fee, you're almost certainly getting rinsed on the rate offered.
tempestn 11y ago
Even among cards that generally use the mid market rate, the time they set the rate and their source will often differ, resulting in the differences mentioned in the OP. So if you feel it's worth your time, and if you can get up to date rates, you can still save a bit by using the card with the best rate on a given day.

mburst 11y ago

Why not just get a card without foreign transaction fees?

tempestn 11y ago

Without real-time rates available from multiple networks, this relies on that back-tested effect that the card with the better rate tends to persist for several days; is there a reason to be confident that will continue? Not that there's much risk if it doesn't, but you could well just be wasting your time.

jakozaur 11y ago

Nice trick, though not that practical. 1% of oversee spending may be to little benefit for the cost: 1. Get more than one card with zero foreign transaction fees. Make sure you won't get charged yearly fee on those. 2. On every transaction, check the rate on smarthphone. Oh, you want to buy $3 coffee, let me check my rate to see if I can save $0.03. 3. More cards is more monitoring hassle. Harder to track, more hassle if they get stolen and you need to block them all. Also payback program tracking is much harder. 4. Same with fees and interests. More card is more likely that you miss some payments and get charged interests/overdraft. One incident and you whole savings can go away. Even with autopayment you need to make sure you balance your accounts.

jannotti 11y ago
I think, but I'm not sure, that you're overstating the complication. Looking at your four steps: 1. Everyone should have two credit cards. You don't want a single point of failure (mistaken fraud freeze, for example.) 2. You only check every day, not every transaction. 3. Again, I argue you should have two (Visa + Mastercard) 4. Again. You're just trying to make things sound hard by repeating the same thing. So. Have two cards. Make sure they autopay themselves. The only new work is checking the exchange rates once a day.
- shivpatelssp 11y ago
  @jannotti Couldn't have explained it better! Only clarification I'd make is you can use this for more than two cards.

rmc 11y ago

Less useful if you live in the Eurozone. I travel abroad a lot, and it's still just Euro....

roel_v 11y ago

It's sad that I have to say this in 2015, but the cheapest way to deal with money oversees is to... use cash as much as possible. It's not as convenient (although, everybody takes cash, credit cards - depends on where you go...), but taking a wad of cash for trips <= 1 week or making weekly withdrawals for travels longer than that is usually by far the cheapest option.

petercooper 11y ago
Agreed. That's what I've done for the past few years. If you get a good rate ahead of time, you're set. The main reason I do it, though, is I had numerous bad experiences with banks and credit cards blocking me over and over when I went to buy things overseas and I was sick of that - cash is king (if you can cope with the safety aspects).
steventhedev 11y ago
I've found that cards get better exchange rates than converting cash. Sometimes several dozen percentage points better. However, if you pull the local currency out of an ATM, you get the card network's exchange rate, and at worst an ATM fee (if any).
- icebraining 11y ago
  Not in my experience (travelling to Budapest). Withdrawing EUR and converting to HUF in a local shop gave us a better rate than withdrawing HUF directly. Never buy stuff with EUR, though!
ollie87 11y ago
Or this: https://revolut.com/ https://revolut.com/
aianus 11y ago
As somebody who travels a lot credit cards are much, much cheaper than cash. It's not even close. Banks / exchange shops have commissions (baked into the exchange rate) from 2.5% to 5%. My credit card charges $5 flat fee to take out cash, gives spot forex rates, and gives me 1% cashback on purchases. So if I take out $500 cash and spend $500 directly on the card I pay zero fees versus the $25-$50 in fees I'd spend dealing with $1000 cash.

jackgavigan 11y ago

You also need to factor in any foreign currency fees your card issuer imposes. For example, in the UK, most banks impose a "non-sterling transaction fee" of 2.75-2.99% on transactions in a foreign currency. There's a UK startup called Revolut - www.revolut.com - which allows you to hold GBP, USD and EUR on the same (pre-paid debit) card and convert money between them at mid-market rates, using an app. It's pretty slick - I've literally stood at the counter, converting GBP to USD while the clerk rang up my purchase, then handed the card to the clerk and had the notification hit my phone seconds after he swiped.

aianus 11y ago
> You also need to factor in any foreign currency fees your card issuer imposes. He's specifically referring to cards that offer spot forex rates. There are many such options in the U.S.
- jackgavigan 11y ago
  In the UK, the non-sterling transaction fee is separate from the currency exchange.

learnstats2 11y ago

So in the example, this method costs the user $7 compared to just always using the Visa card. The quoted "savings" are compared to the worst possible case - which can only happen if... you use the suggested app.