Very basic question but I have not much knowledge in this field so sorry:

Say I have a bank account and over the past year there were transactions in different currencies. I am guessing that a transaction in a different currency than 'mine' (whatever that is, I assume an account has like a 'default' currency) gets booked (immediately / later that day / ...) with the exchange rate (at that time / 4th the end of the day / ... ?) + some fees.

How exactly does booking of a transaction in any currency work?

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    $\begingroup$ You would need to ask the bank involved, since it is handling the transactions for the client. I don’t see how anyone here can help you with this question. $\endgroup$ – Brian Romanchuk Apr 14 '20 at 12:14
  • $\begingroup$ oh ok I thought there was some universal way on how this is handled. Thanks $\endgroup$ – JonEasy Apr 15 '20 at 5:42

Let me explain you in the most simple way how it work behind the scenes...

Credit card issuers and payment networks charge cardholders an international transaction fee if the purchase has been made abroad or an overseas bank has to interfere into the transaction process. (it is roughly for about 1 to 3% of the transaction amount, some issuing bank can even avoid charging it). Each credit card issuer uses its own currency conversion rate (per each transaction). I.e. in e-commerce when the transaction occurs (merchant gives you the option to process the transaction in foreign or local currency) and the merchant gets to choose the exchange rate. Paying in local currency means your credit card network will handle the conversion (less costly). The exchange rate for the customer’s home currency is calculated by adding the wholesale interbank rate and the merchant’s foreign currency fee.

E.g. in the US international e-commerce (when accepting payments from other countries with other currencies) merchants have to have an international merchant account/ foreign currency payment gateway but they supposse higher risk of chargebacks (you can file it as a customer) and that is why the rate per transaction tends to be higher /up to 6% for merchant).

What you as a customer do not see is a process behind the scenes --Till the transaction settle, is cleared and authorized it can take even 24 hours or even for about 2 days => one thing is you see on your bank statement the money has been deducted from your account but for e-commerce where the manual confirmation of any order or reservation is needed it has not been settled on merchant’s account yet and that is why you have to wait until it is authorized and settled (vendor's account set up plays a vital role as well) and issuing bank , acquiring bank and bank network communicate first and accept or decline the transaction (you can come across a pending transsaction mainly if an an AVS mismatch occur, it is not your failt but it takes time to bank to communicate and validate it, as you have to submit an signed authorization form to prove your billing address).

That explains as well why if you decide to return a product or service is harmful to any business as the handling and bank transaction fees are always associated with the purchase as the customer will not bear it (has the right to return goods) and you are protected as customer anyway, from merchant’s point of view they have it stipulated in contracts with banks and partners.

You as a final consumer just see a money charged form your card (from the statement from your bank), you can check with retailer to see where is based and which payments options offer and mainly with your bank how much charge for int payment.

  • $\begingroup$ very interesting thank you for this thorough answer $\endgroup$ – JonEasy Jun 19 '20 at 11:26
  • $\begingroup$ My pleasure @JonEasy :) $\endgroup$ – Nora Kacenova Jul 4 '20 at 17:03

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