When you're buying something by credit card overseas it's often quite comforting to pay an amount designated in New Zealand dollars.
But over the years I've had a few complaints from travellers who ended up paying more as a result. And now the Banking Ombudsman has confirmed that paying in the good old familiar Kiwi is likely to be an expensive luxury.
Ombudsman Deborah Battell says her office, too, has received complaints from travellers and online purchasers that paying in their home currency when using credit cards may actually cost them more.
"Our inquiries have revealed that complainants were likely to be right about purchases costing more."
It is, she says, becoming increasingly popular for merchants overseas - such as retailers, accommodation providers and restaurants - to offer travellers the option of paying for purchases in the currency of their credit cards.
"So, if you hold a New Zealand credit card, you can elect to be charged in New Zealand dollars rather than the currency of the country in which you are travelling."
Some overseas merchants don't even offer travellers a choice, they simply process the transaction in New Zealand dollars.
"Presumably," says Battell, "this is because they can make an additional margin on the sale."
Explaining how this happens, the Ombudsman says exchange rates are set by the credit card companies. But currency conversion fees, which are additional fees charged for converting foreign currency into other currencies, are set by the merchants, including banks.
Banks in New Zealand typically charge between 2 and 3 per cent of the New Zealand dollar amount.
"The main advantage of paying in your home currency is that you know what you will actually pay at the time you make the purchase," she says.
"However, from our experience you are likely to pay more for the privilege as currency conversion fees are typically higher."
The Banking Ombudsman's advice is:
* Find out what currency conversion fee your bank charges before you go away.
* Ask the overseas merchant what their conversion fee is before the transaction is processed.
* If the overseas merchant's conversion fee is higher, or they won't tell you, ask to have your credit card charged in the country's currency rather than New Zealand dollars.
* If the merchant insists on charging in New Zealand dollars, then you have the right to decide whether you want to proceed with the purchase or shop around for a better deal.
That's sound advice. I would add that it's also a good idea to take note of exchange rates when you're overseas, so you are always fully aware of the going rate and can quickly calculate what you are paying in NZ$. And it's not a bad idea to take a cheap calculator with you, partly to be sure of amounts, but also to counter the old traders' trick of tapping out a few figures and plunking the calculator on the counter with an air of bogus authority.
If you want to find out more about this issue visit online.