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We love the internet. It’s convenient, transparent and has completely changed our world in ways we could never have imagined.
One such area is online shopping. 20 years ago, none of us could have imagined being able to buy items online and having them delivered right to our doorsteps. And this does not just apply to buying stuff within Singapore, but around the world.
We also enjoy better price competitiveness when we purchase items online. That’s because e-commerce sites are fully aware of the fact that it’s easy for us online shoppers to compare prices across various websites, and to choose the site that provides the best price.
That’s the reason why many websites give discounts or promo codes in order to price differentiate themselves from their competitors. Another common method would be to provide free delivery for orders about a certain amount, thus incentivising shoppers to spend more with them.
Given all these perks of online shopping, it might be easy to assume that online shopping is cheaper.
While that might be true to some extent, what many Singaporeans don’t realise is that they are likely to be paying more than what they expect when purchasing online products overseas.
Why Am I Paying More For My Overseas Online Purchases?
Unlike using your credit cards for local purchases, or paying with foreign currency where you are familiar with the currency conversion rate given to you by the moneychanger, shopping online overseas requires the use of credit cards which would incur a fair amount of hidden costs that may not be explicitly made known to you, the consumer.
(1) Double Conversion For Foreign Currency
While we are familiar with the currency conversion rate given to us by our local moneychanger, most of us would have no idea what the conversion rate is when it comes to using our credit cards for online purchases.
The typical way we find out would be to simply Google for the conversion rate. But what makes us think that the “Google” exchange rate that we see is what we are actually getting from the bank? Truth is, we are probably getting a much more unfavourable rate.
One of the reasons for that is because there is “double currency conversion” that we will be exposed to.
Many of us don’t realise that the bank actually converts the money we have spent to US Dollar first, before converting it to Singapore Dollar. So unless you are already getting charged in US Dollar, you will actually be facing the foreign currency conversion rate TWICE, not once. Most banks will use the currency conversion rate provided by their card issuers (i.e. MasterCard, VISA)
For example, if you buy an item from a UK website for £100. A quick Google conversion would tell you that the item should cost you about SGD$176 (conversion rate: 1:1.76).
What actually happens however is that the currency is converted first from UK Pound To US Dollar, before being converted from US Dollar to Singapore Dollar, which will then be charged to your credit card.
Here’s an example of how the math work out based on MasterCard and VISA currency conversion rate at the point of writing (17 Feb 2017)
|UK Pound||US Dollar||Singapore Dollar|
|Based On MasterCard Exchange Rate||£100||USD$125.01||S$177.39|
|Based On VISA Exchange Rate||£100||USD$125.25||S$177.93|
|Based On “Google” Rate||£100||–||S$176|
* As an observation, it appears that MasterCard generally provides a better exchange rate compared to VISA.
As shown above, what was thought to be an S$176 purchase from the UK actually turns out to be more than S$177.
(2) Foreign Currency Transaction Fee
Most, if not all, credit cards in Singapore apply a foreign currency transaction fee. This is basically an administrative fee charged by the bank that issued the credit card for any transactions that you made that are not in Singapore Dollar, including online purchases.
The rates vary depending on each bank but in general, you can expect charges to be at about 2.5%. This is applied to the final amount charged in Singapore Dollar.
|UK Pound||US Dollar||Singapore Dollar||Plus Foreign Currency Transactions Fee|
|Based On MasterCard Exchange Rate||£100||USD$125.01||S$177.39||$181.82|
|Based On VISA Exchange Rate||£100||USD$125.25||S$177.93||$182.38|
|Based On “Google” Rate||£100||–||S$176||$176|
As shown above, what was thought of as an S$176 purchase is now around S$182, or about S$6 more. If your purchases were £1,000, you would have spent S$60 more than what you initially expected.
FinTech Start-Up RateX Hopes To Help Singaporeans Pay Less For Online Shopping
A Financial Technology start-up, RateX hopes to help Singaporeans overcome this problem of paying more than they expect to.
Its value proposition is simple. To offer you the best rates (i.e. the “Google” rate) when you buy something online.
That means avoiding unfair exchange rate and hefty transaction fee.
And in case you are wondering, yes, you can still continue using your credit card for payment and will enjoy any credit card perks that comes along with using it.
RateX works as a browser extension on Google Chrome. To use it, simply download it and shop online as per usual. RateX doesn’t keep any bank details so there is nothing you need to be concerned about, except for how much you are saving.
For now, RateX is available on Amazon and only accept Singapore Dollar payment, which is exactly what we need. The team have told us that they are working hard to onboard another 20 or more websites in the coming months so that online shoppers in Singapore can enjoy greater savings for more overseas websites through RateX.
As an added bonus, RateX also automatically helps you find coupon codes available across the internet and to apply it before checking out so that you can fully maximise savings when you shop online.