Tesco's Foreign Exchange Rates more than 4.75%

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Tesco foreign exchange charges on credit cards could cost you more than you are expecting so read the small print.

Consumers using the Tesco's credit card have thought they have been wrongly overcharged, only to find out that they have not due to Tesco's has quietly started using its own exchange rates to convert overseas purchases into sterling which are higher than the standard Visa and Mastercard rates used by rival cards.

This could mean that millions of Tesco credit card holders will be hit with higher foreign exchange fees when using their plastic abroad, which could be raking in around £12m a year for the supermarket group, according to a Guardian Money investigation.

Phelan accuses Tesco of "manipulating" exchange rates, although Guardian Money has found that Royal Bank of Scotland/NatWest has also quietly introduced its own exchange rates along the lines of Tesco's.

Guardian Money investigation research shows that in many cases the supermarket group is imposing an extra mark-up of around 2% or more, on top of the published 2.75% foreign exchange fee. This translates into an extra £4 going into its coffers based on a €200 (£167) purchase, over and above what someone would pay if they used a rival card.

The vast majority of UK credit card providers use the Visa and MasterCard exchange rates, which are very close to the wholesale market rates and therefore tend to be quite favourable. The bank or card company then adds its commission fee.

Even though its cards display the MasterCard logo, Tesco has introduced its own exchange rates. They are set by RBS, which, along with its NatWest division, made a similar change to its own cards' terms in early 2008, allowing it to use an exchange rate "determined by us".

Many cardholders are likely to be unaware of this. Money could find no mention of the change on Tesco's website, even in the small print. In addition, Tesco has confirmed that its exchange rates are not published, and says the way they are calculated is "business sensitive". The only way you can check them, is by ringing up.

It is a similar story with RBS/NatWest. We could not find any clear information about the change on its websites – again, customers have to call to find out. By contrast, Visa and MasterCard publish their exchange rates online.

The combination of Tesco "own-brand" exchange rates and the disclosed 2.75% fee means many cardholders are being hit with a charge of 5% or more.

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Tesco's Foreign Exchange Rates more than 4.75%

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