## Commonwealth Bank – Overseas Transaction Fees

I travel. I have travelled recently to Singapore and the Philippines a couple of times. I have used ATMs against my debit card to draw cash whilst overseas. The Commonwealth Bank of Australia (CBA) has finally managed to bamboozle me on the fees until I sat down and worked it all out.

The first thing I should say is that I spent about an hour on the CBA website (http://www.commbank.com.au/) looking to find out how these fees are calculated. Unsuccessful. So, firstly, a summary of the transactions:

 Location Date Bank Foreign Currency Aussie Dollar Equivalent Fee Charged % Charge Singapore 11 Oct 2010 DBS Bank SGD 200 163.69 5.00 3.05% Singapore 18 Oct 2010 ANZ Singapore SGD 100 78.03 7.34 9.41% Singapore 25 Oct 2010 HSBC Changi SGD 200 157.67 9.73 6.17% Singapore 1 Nov 2010 OCBC Singapore SGD 100 79.18 7.38 9.32% Manila 13 Oct 2010 BDO PHP 8200 191.94 10.76 5.61%

I’ll admit it, I am was perplexed at this point. There does not seem to be any consistency in the charges – well, except for the ANZ and OCBC charges in Singapore. As they were so similar, there needed to be some type of consistency. The CBA is, after all, a bank and does not do inconsistency well.

I decided to make a guess and assume (yes, I know, always a risky business) that the charge is a combination of a fixed and floating percentage. So, if I guess a little and say the charge is AU \$5.00 per transaction plus 3% of the transaction amount in Aussie dollars then that gives me the following:

• ANZ – \$78.08 – fee calculation is therefore \$5+(78.03×3%) = \$7.34
• OCBC – \$79.18 – fee calculation is therefore \$5+(79.18×3%) = \$7.38

So far so good. Now let’s apply this calculation to the rest of the table:

 Location Date Bank Aussie Dollar Equivalent Fee Charged Fee Calculated Difference Singapore 11 Oct 2010 DBS Bank 163.69 5.00 9.91 -4.91 Singapore 18 Oct 2010 ANZ Singapore 78.03 7.34 7.34 0 Singapore 25 Oct 2010 HSBC Changi 157.67 9.73 9.73 0 Singapore 1 Nov 2010 OCBC Singapore 79.18 7.38 7.38 0 Manila 13 Oct 2010 BDO 191.94 10.76 10.76 0

Looking  better and now somewhat understandable. However, the DBS Bank at the top of the table still had me flummoxed. It seems as though the bank had forgotten to charge the 3% variable part of the fee. Forgotten? I don’t think so. Perhaps it was an arrangement between the two banks and therefore I should look for DBS ATMs in future? Or perhaps all is not what it seems!

I remembered that for that withdrawal one of the options at the DBS ATM was to do the transaction conversion from Singapore dollars to Aussie dollars at the ATM itself and I had said yes. In that case, it must be that the foreign transaction fee charged is just a flat \$5.00.

So, is the bank getting at me? Yep. sure is. On 18 October, the mid rates between Aussie and Sing Dollars were around 0.795. On 11 October they were around 0.775. The rate for conversion on those two dates was, respectively, .07803 and 0.81845. This means that there was a foreign exchange premium added to that 11 October 2010 transaction. Effectively, it meant that the total fee I was paying by doing the exchange conversion on the back of the transaction was \$11.69 (\$6.69 on exchange rate premium plus the \$5.00 fee).

Of course, had I let this process normally, and not taken advantage of the exchange conversion at the time of the transaction, then I would have paid a fee of only \$9.68, effectively saving myself \$2.28.

Well, now I understand the way these fees work and I suspect you do to. Moral of the story – when the bank offers you a nice service that looks like it will save you money it will likely cost you more – it’s just that you will not be easily able to see where the costs occur. Next trip I think I will take cash out in Australia and convert that to foreign cash the old fashioned way at the bureau de change in the country of arrival – let’s see how that goes.

## Swine Flu vs Credit Crunch Recession

For the last night or two the markets were down. The ASX fell, the Nikkei shed value, the FTSE dropped and Wall Street was shaky. However, it was not the recession, the credit crunch or the recent usual suspects but rather Swine Flu that was causing the drop.

So all the stimulus packages and the spending of money to stimulate economies obviously is unnecessary. All we needed to overcome the global financial crisis was some Swine Flu – a couple of weeks of this and the fears of recession will be well forgotten as the recession becomes yesterday news.

Hmm, maybe Malthus was correct after all.

## Banking Systems and Meltdowns

Gee – picked a good time to start work with a new company, especially one selling software for financial solutions internationally. Still, it is now that banks should start to consider their systems, both their software systems as well as decision making and risk systems. If nothing else, it seems that the Australian banks at least will need to learn the lesson (once again) that their bread and butter business relates to the average household and its savings, not to the corporate customer nor to the large borrowings that can be made on the markets.

I am excited with the new role though and enjoying contacting the Aussie financial institutions … today Oz, tomorrow NZ, the day after the rest of the Pacific 😆

## Banks and Post Offices

Today was a really mixed day. I had to deal with my bank. Sigh! I can remember a time when dealing with your bank meant dealing with your branch staff and the branch manager. Now, however, with anywhere banking and reducing the staffing levels at branches, you get to deal with the call centre. Today I dealt with the Hobart and Newcastle call centres to be told at the end of it all “well, we really can’t help you at all, even though it is your money, as our procedures are security procedures and they are there to protect you” even when those procedures are not designed to protect me or my money.

Compare that to the Australian Post Office. Awaiting an Express Post letter that had not arrived but needed the contents early, we telephoned the Post Office, spoke to the sorting centre staff and several hours later the recalcitrant letter was located and held for us to collect tomorrow morning early. Kudos to Australia Post then who can still hold their heads high and say, “yes, we do help out customers”.

Aussie Post 1: Aussie Banks 0