New 1% fee for using Thai credit cards abroad
‘Dynamic currency conversion’ applies to payments in baht at merchants and foreign online platforms
Holders of credit cards issued in Thailand will be charged a fee of 1% for foreign currency conversion when they make purchases in baht from merchants and online shops registered outside the country.
The measure will take effect from May 1, according to a notice on the Bangkok Bank website.
Local credit card issuers are imposing the fee, known as dynamic currency conversion (DCC), for payments in baht using Visa and Mastercard credit and debit cards. The fee also applies to withdrawals of baht banknotes at ATMs abroad.
A source in the financial sector who requested anonymity said Visa and Mastercard are charging the fee to local card issuers, which are passing it on to consumers.
Currently local credit card providers charge a foreign currency conversion fee with a maximum rate of 2.5% of total spending for Thai-issued Visa and Mastercard cards for spending in foreign currencies abroad or online with foreign-registered platforms.
The new 1% fee means cardholders will have two options. If they choose to spend in foreign currencies while abroad, they will be charged a maximum of 2.5% based on the prevailing exchange rate calculation.
If they choose to spend in baht on their cards while abroad or through a foreign online merchant, they will be charged 1% based on the DCC calculation.
Some offshore merchants — including Apple, Netflix and Agoda — have no choice but to calculate the fee automatically under DCC. As a result, cardholders will be subject to the 1% charge, the source said.
Paul Srivorakul, group chief executive of aCommerce, a regional e-commerce enabler, said that DCC offers customers the convenience of paying in their own currency on foreign e-commerce sites, potentially improving transparency and conversion rates as it simplifies the decision-making process.
However, it adds fees to consumers and brings operational complexities for merchants. There needs to be clear communication to avoid any customer dissatisfaction.
There may be local regulations governing the use of DCC and how it must be offered to consumers, including the requirement to provide a choice between local currency and the customer’s home currency, and to disclose all associated fees clearly.
Striking a balance between these factors is crucial for using DCC effectively in e-commerce, Mr Paul added.
Kulthirath Pakawachkrilers, president of the Thai E-commerce Association, said DCC could affect consumers who make frequent use of Visa and Mastercard abroad or on foreign online platforms.
She said consumers may opt for other payment choices, such as e-wallets.
Ms Kulthirath said platforms that will be affected by DCC include Spotify, VIU, Agoda, Booking.com, Expedia, Klook, Airbnb, Trip.com, Facebook, Google, TikTok, PayPal, Alipay, eBay, Amazon, Alibaba and Taobao.
Among the platforms that should not be affected are Shopee (Thailand), Lazada (Thailand) and Grab Taxi (Thailand), she said.
E-payment transactions last year were worth 28.8 trillion baht, up 10.4% from 2022, according to a Bank of Thailand report. Card payments totalled 5.9 trillion baht, up 8.2% from 2022.
Piyachart Ratanaprasatporn, chief executive of 2C2P, a regional payment gateway, said he disagrees with Thai banks charging consumers an extra 1% fee.
Mr Piyachart said that when credit cardholders make a transaction abroad, they have to select a certain currency. The financial institution that provides the card terminal to the merchant can make a profit of 2.5% to 3% of the foreign-exchange rate.
He suggested that Thai users should choose to pay in the destination currency, such as dollars when in the US, so they can avoid the 1% charge.
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