VANITY QUESTION RE FOREIGN CURRENCY TRANSACTIONS

My pointy little head | 12/1/2005 | Raybob

[RayBob]

I have been asked about an exchange levy on foreign currency transactions where the money leaves the US. Apparently a 1.75% levy is assessed when US currency is converted into a foriegn currency and the money sent out of the country. I need to find out everything I can about this and have come up completely empty. I figured that there had to be someone here who has experience with this levy and can at least point me in the right direction to look.

[RayBob]

Thanks in advance for any help. I'm totally lost on this one.

[Petronski]

This post is further evidence that we all must go out and buy gold! Lots of it!

[DTogo]

Banks can often charge various fees to transfer US$ into a foreign account in that currency, but it often varies from bank to bank. I've never heard of this 1.75% levy.

Are you talking about personal transactions or business-level monetary amounts?

[peyton randolph]

To avoid the fees, and any searches, I just stuff the towel on my head, and fill my hollowed-out Koran with c-notes.

Seriously, religion of peace adherents are known to duck this by purchasing jewels and taping them under the breasts of their women...knowing full well that Customs won't dare touch the females.

[Deaf Smith]

I thought everyone transfered their money by way of cigarette boat.

[KarlInOhio]

Never have heard of this. Currency exchangers take a cut, and credit card companies are getting a bigger cut recently, but I have never heard of a currency exchange tax in the US. Various One-World types have proposed a tax on all currency exchanges, but nothing has come of it yet.

[USF]

You shouldn't be paying any levy.

You simply need the best rate you can find and ask if there are any other charges.

I would advise you to use a currency broker if the amount is considerable and NOT your local bank.

There should not be anything else to pay except for a small fee for an international transfer of $10-30 at the most per transaction at the most in some cases, and if the amount is significant, wouldn't expect to pay that either....

[bert]

Ask your bank international department about a wire transfer in US$

Ask them about international wire transfer in the required currency.

[NYCVOICE]

http://www.technologyinvestor.com/login/2004/Aug9-05.php


"Credit cards and ATM machines are tacking on heavy surcharges if you use them overseas. Visa, MasterCard, American Express and others are tacking an extra 2% to 5% fee on international transactions. This is not a currency-exchange commission, because the Visa/MasterCard clearinghouse has already taken its commission (currently 1%) when converting your transaction from foreign currency into U.S. dollars. My wife learned about this trick when she checked her MasterCard bill after a three-day quick trip Montreal. There was an extra $43 on it.

There's a worse wrinkle. Let's say you've bought an item in Paris and charged it to your Visa or MasterCard. You take it back to the hotel, find that it doesn't fit or doesn't work, and return it to the store. The shopkeeper now issues a credit in euros. Visa or MasterCard converts the credit into dollars (taking their commission) and passes the dollar amount on to your credit-card company. Your credit-card company may then impose a surcharge on the credit. In other words, you're gouged twice: first with the 2% to 5% surcharge on the original purchase, and again with a 2% to 5% surcharge on the store's refund.

Another wrinkle is the "cross-border transaction fee," which applies to foreign transactions in your own currency. For example, if you're an American and you charge $1,000 in onboard charges aboard a cruise ship, the credit-card company may pad the bill by another $20-30 just because the ship was outside of U.S. waters.

How to avoid surcharges:
+ Take cash.
+ Check with your credit card issuer just before you leave. Policies change quickly. Maybe you'll find a lucky one.
+ Don't buy anything in Paris. In fact, don't go there.
+ Stay home.

Beware of hidden ATM fees: Some banks are now charging hidden fees of several percentage points on foreign-currency ATM transactions. "


http://www.technologyinvestor.com/login/2004/Aug9-05.php

[USF]

Ps, if you don't need to transfer right away, you may want to ask the broker for his/her spot rate and consider a forward contract instead.

[Larry Lucido]

Louis Farrakan says the levy was deliberately bombed. That's all I know.

[Alberta's Child]

I've lived in both the U.S. and Canada, have done business on both sides of the border for several years now, and have exchanged these currencies on numerous occasions. If you have specific questions you can either post them here or Freep-mail me. I am not aware of any specific 1.75% "fee" that is charged on transactions of this sort. The Canadian and U.S. currencies are very stable in relation to each other, so there may be some aspects to other currency transactions that don't apply to these two.

In my experience currency exchanges are very similar to commodity or security exchanges, in which the "dealer" in question (say, a bank) will have "bid" and "ask" prices that are somewhat different than the real price of the currency in question. The Canadian dollar traded at $1.1669 per U.S. dollar at the close of business yesterday according to the Bank of Canada (I know this because I track it on a monthly basis, and yesterday was the end of the month), which means that $100 U.S. dollars would get you $116.69 in Canadian dollars -- in theory.

The reality is that $100 in U.S. dollars would get you something less than $116.69, because if you went into a bank and exchanged the currency the bank would have two posted exchange rates -- the rate they would use to calculate the exchange if they were selling you Canadian dollars (let's say $1.1469) and the rate they would use to compute the exchange if they were buying Canadian dollars from you (let's say $1.1869). The difference between these two numbers -- the "spread" -- is how the bank makes money in the currency exchange business.

Unless you are exchanging cash, you may not even be aware of this spread. The bank will simply tell you how much Canadian cash you get for your U.S. cash (or vice versa). If you use a credit card or ATM card in Canada, your statement will show the exact rate at which the exchange was made, not the "official" exchange rate posted by the Bank of Canada.

I believe credit and ATM card transactions include a built-in service charge that is hidden in the cost of the exchange when posted to your account, so with a credit card transaction using the numbers I posted above you will probably get a slightly lower exchange rate on the transaction (say, $1.1269) than you would otherwise get if you were exchanging cash.

I hope this has been helpful, and not too confusing!

[Dark Skies]

You shouldn't be paying any levy.

It's been a while for me, but I don't know of any "levy." All I remember is a wire transfer fee between institutions and no charge whatsoever for currency exchange (fees are built into the exchange rate IIRC).

[firewalk]

.

[reformedliberal]

I bought a gift online last summer for a friend. It was 36 or 38 GBP (I forget which). My Visa bill was for USD$68 (including shipping) and the 1% transaction fee from Visa was transparently listed as a separate item.

I was actually pleasantly surprised, as I had used a currency converter which said the amount would be USD$70.

FWIW

[RayBob]

Thanks for the input. I could find nothing on this levy in the statutes and regs and confirmed through the US State Dept and Treasury that there is no levy on foreign currency transactions where the money leaves the country. This is likely just the bank's fee or commission.