Unfortunately, I can’t seem to turn up a link to the piece that aired this evening on the CBC news (not The National; it was CBC News: Our World, I think — we were watching on Newsworld, in any case) which would have provided some of the details, so bear with me as I recall things as best I can.
This piece dealt with a Canadian who had travelled to the US, where he’d made some purchases using his credit card including software for the GPS in his car — an Audi, you could tell clearly from the 4-ring emblem on the trunk. The point of the piece?
He’d been charged an extra fee on the foreign exchange purchases he’d made — extra, as in above the exchange rate for the date. And he had called the bank to complain about this; they informed him that the fees were clearly explained in the small print (his words) on his statement. He said, showing the statement to the camera, that it was printed “faintly” and said that the person he’d spoken to claimed that “they had been having some problems with the quality of their printing” (or words to that effect — again, _his_words_, as they didn’t have anyone on from the bank IIRC), the smug implication being that the bank was being (or at the very least, approaching) deliberately deceitful.
Well, let me say that both K and I could quite easily read the fine print on the screen — on our not-HD, not large screen (20″) TV. We could see that it said foreign exchange transactions were subject to a fee of 2.5% on top of the current exchange rate. Sure didn’t look deceitful to me…
They also trotted out some dude from a consumer organization — can’t remember its name — who went on about how this “hidden” fee added up to millions, if not billions, of pure windfall for the banks, on the backs of beleaguered consumers.
Now, I’m not an apologist for banks or other for-profit businesses — those who know me, know I’m fairly left leaning, socially conscious, yadda, yadda. But I also understand quite well that profit is not an inherently evil thing. How some people or corporations go about achieving their profits is another thing, and I know there are plenty which pursue profit at all cost to the detriment of society (well, *some* parts of society — usually the parts that can least afford to be screwed over to the benefit of someone who probably already has more than enough, several times over… did I mention my socialist leanings?), the environment and so on.
The report went on to show the Canadian government’s web site where the foreign exchange fees charged by the major banks on their credit cards are listed. They all charge 2.5% — perhaps there are others, not shown, that have lower or higher fees. Given the competition between credit card providers (seems like I get Yet Another “You have been pre-approved for a <fill in name of a credit card brand here> card!” mailing at least a couple of times a week… I start worrying something has happened to the letter carrier if there isn’t one waiting for me when I get home), you’d think one of them would shave a fraction of a percentage point off their foreign exchange fee in order to lure customers over from The Other Brand. And then they’d all have to drop the fee to stay competitive… which leads me to think that there’s not that much room for them to move on this, or it would happen.
Now, as someone who has done a fair bit of travelling and living abroad, I have a lot of practical experience with foreign exchange. And the exchange rate that’s quoted in the newspaper, on the TV and the internet is not the rate the banks use in processing transactions — whether you’re buying (or selling to them, for that matter) actual currency or they are converting a credit card transaction.
Like any business, they buy for less than they sell — this rule works for a company selling widgets as well as for a bank buying and selling foreign currencies; it’s called making a profit, which is what a business is, well, in business for. The margin between what they pay to buy a currency and what they sell it to you for — less the costs they incur in making the transactions — is their profit. The quoted exchange rate is usually halfway between the two.
So what really gets me cranky about people like the one in the new items is this: their sense of entitlement. This person was obviously reasonably well off — the Audi, the trip to the US to buy things (hey, why’n'cha shop in Canada and support Canadian businesses?) — and yet he’s outraged at being charged 2.5% for a service, for the convenience of not having to go to the bank and get foreign cash (which, I can assure you, would not be sold to him at the rate reported in the news either… there’s still that pesky profit thing happening) to carry around.
That’s not the only reason I get cranky at this kind of whiny behaviour: you can bet your sweet assets that these people have investments (as do I, for retirement — hey, leaning left does not mean you stop looking out for yourself; you just take the needs of others into account while doing it…). And what do they expect from their investments? Why, they expect them to grow, pay dividends or interest — which come from profits. And the expectation is always that the company turn the biggest profit possible; often without regard for the impact to others.
This is called “wanting to have your cake and eat it too”. People like this want to buy everything cheap but have their investments turn big profits. Do the math, people — it won’t work, at least not in the long run. That mutual fund you have? Dollars to doughnuts it’s invested in a financial institution or two; you want the fund to grow? Pay for it, like everyone else, in the service charges the banks make their profits from.
Myself, I prefer to deal with companies that charge a fair price for their products or services, are socially responsible (to their employees and to society as a whole) and derive justifiable, sustainable profits from their enterprise in order to deliver a reasonable return on investment to shareholders.
OK, enough ranting for now — the story on the CBC was really just a trigger for the “having your cake and eating it too” issue that’s been bugging me for a long time.