Bizarre AUD conversion

[Saltrams]

Hope I’m scribbling in the right place…
I bought 2 internal flights on Virgin Australia for a total of $602.85 & having experienced over an hour’s struggle to pay using their own payment system in the past, I opted to use PayPal.
I wanted a good exchange rate & no fee card, so (using Martin Lewis’ mantra of “always pay in local currency never in pounds” I chose my Starling Bank debit card.
Anticipating the smugness I have felt in the past with this technique, I took screenshots to check how much I would save.
Looks like I can’t add images. Well, the PayPal amount was £265.39 at their stated rate of 1.85270 but when I chose to pay in AUD Starling charged me £312.36 at 1.9300 Miffed now!
Can anyone account for this? Is the PayPal rate of exchange notoriously generous & I just never knew?

[kaconym]

I think there’s a mistake. A conversion of 265.39 GBP to 602.85 AUD would give an exchange rate of ~$2.27 to the pound. The exchange rate hasn’t been that good since early 2009. An exchnage rate of ~1.85 on 602.85 AUD would give a cost of ~325 GBP. The true exchange rate would give you a cost of about £309, so you’ve done very well from using starling and therefore the Mastercard exchnage rate with no added bank fees.

Generally Mastercard offer the best exchnage rate of the major payment options. It’s normally slightly better than the Visa and American Express rate, and always significatly better than the PayPal rate. Obviously if your bank adds exchnage fees this outweighs anything else. The Mastercard exchnage rate is normally beaten by Wise, and the new Trading 212 Card.

[JDB]

@Saltrams – have you taken into account any fees for payment by card or PayPal which are fairly standard there?

In general, whether a merchant or customer, PayPal offers the very worst deal in town making DCC look generous. With all these parties in the transaction there may also be some distortive fixed price fee along the chain.

[John]

Paypal incurs a fee of 0.98% so a base price of A$602.85 would be charged A$608.76

The mastercard exchange rate applying at the time of your post was 0.513901, which indicates you should have been charged £312.84

I cannot understand where £265.39 would have come from

[Lady London]

Paypal loadings on transfers earlier this year were showing a loading of about 6% they were taking.

Funnily enough running these figures it looks like the 6% loading was deducted rather than added.

If so then it will be a systematic error I’d think they might spot when a number of transactions have gone through or at latest on month end reporting.

I’d expect a correcting tranaction sometime in the next 1-4 weeks if you had transacted wuth Paypal but will be very pleased for you if you don’t see one.

Starling is so good I certainly woukdn’t begrudge them their small earning on this transaction either.

[TGLoyalty]

Well 605.85/1.8527 = £325.39 not £265.39. Are you sure you just don’t have a PayPal balance of £60 it was going to take plus the rest from your card?

Because simply 1.93AUD/£ is about 4% better than 1.8527AUD/£

[Saltrams]

Thank you so much everyone! Tangentially, I’m always impressed by the amount of helpful & knowledgeable people on the HfP forum.
Anyway, to those who asked if I had done the maths on the rates…bless you, no. That’s not something I do well. Thank you to those who did but I am now wearing my frightened rabbit in the headlights face. The possibility of an error in their sums on PayPal crossed my mind, as did the option that I was over confident in Starling. I didn’t choose PayPal’s conversion but if I had, would it be entirely legal for them to then say “we got it wrong so we’re changing what we told you”?
All immaterial as I’ve paid by Starling & have my tickets. Looking forward to assessing & reporting on the flight quality for the forum IDC.
Thanks again 🙂

[John]

Saltrams wrote:

if I had, would it be entirely legal for them to then say “we got it wrong so we’re changing what we told you”?

No idea but does anyone else remember the Travelex Supercard (2nd iteration) which did just that – charged the underlying card an extra few pounds the next day because the “rate changed”, but didn’t refund you if the rate went the other way…

[Fennec]

kaconym wrote:

I think there’s a mistake. A conversion of 265.39 GBP to 602.85 AUD would give an exchange rate of ~$2.27 to the pound. The exchange rate hasn’t been that good since early 2009. An exchnage rate of ~1.85 on 602.85 AUD would give a cost of ~325 GBP. The true exchange rate would give you a cost of about £309, so you’ve done very well from using starling and therefore the Mastercard exchnage rate with no added bank fees.

Generally Mastercard offer the best exchnage rate of the major payment options. It’s normally slightly better than the Visa and American Express rate, and always significatly better than the PayPal rate. Obviously if your bank adds exchnage fees this outweighs anything else. The Mastercard exchnage rate is normally beaten by Wise, and the new Trading 212 Card.

This is no longer the case that Mastercard is generally the best; I’ve moved over to using Visa after frequently getting a better rate than Mastercard.
The acceptance of Visa is slightly better when outside of Europe / North America too.

[John]

Fennec wrote:

This is no longer the case that Mastercard is generally the best; I’ve moved over to using Visa after frequently getting a better rate than Mastercard.
The acceptance of Visa is slightly better when outside of Europe / North America too.

As the exchange rate to be used is published on the Visa and Mastercard websites in advance, you always have the ability to check which card network will give a better rate (as long as the transaction is going to be processed immediately)

[JDB]

John wrote:

Fennec wrote:

This is no longer the case that Mastercard is generally the best; I’ve moved over to using Visa after frequently getting a better rate than Mastercard.
The acceptance of Visa is slightly better when outside of Europe / North America too.

As the exchange rate to be used is published on the Visa and Mastercard websites in advance, you always have the ability to check which card network will give a better rate (as long as the transaction is going to be processed immediately)

The last phrase – “as long as the transaction is going to be processed immediately” is the key one. If spending abroad you can’t know if it will be as it depends on a number of variable factors including the structure of credit card networks in a particular country and the time vs your home country. Only cards like Curve will fix at the moment. At the opposite end of the spectrum is Argentina where the rate is neither published in advanced (or afterwards) and may not be fixed for a week or more. The Visa/Mastercard rates also move and on any given day in any given currency one might be better than the other; it varies. In reality except for unusually large transactions you aren’t even talking about the price of a cup of coffee so it’s not really worth the effort of trying to finesse something over which you ultimately have no control or certainty of insight.