FX Redux

Michael Rudd, CFA | President, CEO and Portfolio Manager

Well, it happened again. I am starting to think that the foreign exchange markets are out to get me. We had great feedback from our Pathfinder Investment Outlook, V11 E25 (please click here for those who missed it) and I am embarrassed to say (for the industry) that it happened again, only this time it was way more obvious.

I have two great kids (I know, every Dad says that) and one of them loves all things soccer (or “football” for the enlightened). My son Luka (he’s 12) plays on a team and recently decided to take his referee course and will start running games for the 6 & 7 year-olds. I thought it would be hilarious to buy him some of that vanishing referee foam that you see in the big leagues. No one uses it locally and it’s purely for professionals, so I thought we would get a good laugh using it for the really young kids.  So, I went on-line and found a company in Maine that sells the foam and ordered a couple of cans. The price was $32 + tax + free shipping. I entered my credit card and hit “buy”. Then I got an alert from my credit card company that I had just been charged $10,042.66….  for ref spray.

It was 9pm at night so I called the credit card company right away and explained the situation and they launched an investigation. They assured me that they would cancel the transaction and I would not be charged anything for the purchase. The next day, I emailed the company and they responded that they have a website issue and that if someone selects an international destination that, upon checkout, $9,999 is added for shipping (I know that is insane, and I can’t understand it either, but it is what it is). They also confirmed that they would cancel the transaction.

For regular readers, I am sure you know what comes next. My credit card is from Canada and is in C$. The $10,042.66 charge was in US$ so the card company converted the purchase price to C$ and charged my card $12,999.95. At the exact same moment, they processed a refund for US$10,042.66 and converted that to Canadian and credited my card C$12,678.86 resulting is difference of C$321.09 (the retail FX spread). This time, the conversation with the bank was much easier as it was so obvious how ridiculous the money grab is. Even the agent was embarrassed, and I received a credit immediately.

“This means that” when you travel, or use your credit card for foreign purchases, you are probably being charged an additional 1.6% for foreign exchange. Please keep this in mind, especially if you transact regularly in a different county. A local currency credit card and a good currency exchange rate can save you $1,000s of dollars over time.

“It’s like déjà vu all over again.” Yogi Berra, 1961

Pathfinder Asset Management Ltd. | Equally Invested™
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Sources: Pathfinder Asset Management Limited

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