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I will use hypothetical numbers, just for examples.

I have account in my bank in euros (EUR). I buy something online and pay for it with dollars (USD). Lets pretend exchange rate is 1 USD = 0.5 EUR. So when I buy something for 30 USD, I get 30 USD reserved in my bank, but stated as 15 EUR. I make a record in my book that I have spent 15 EUR.

Several days later exchange rate changes, lets pretend that it changes to 1 USD = 0.66 EUR. The same day bank fixes the transaction it has reserved earlier. Still it is 30 USD, but since the rate has changed, it fixes 20 EUR, not 15 as previously.

So the day I buy something I assume I pay 15 EUR, but later bank takes 20 EUR :(

Is such bank's behavior is a regular, or are my rights violated?

Dima
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2 Answers2

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Your bank does not reserve 30 USD since your account is held in Euros. Suppose that you are paying directly from your bank account for your on-line purchase, e.g. filling out the form for an electronic funds transfer from your bank account instead of the form for a charge to your credit card. At some later time, the merchant will request your bank to send them 30 USD from your account as per the authorization that you have granted them to withdraw 30 USD from your account. Until the bank receives this request, it has no information that you have authorized this charge. Upon receiving the information, the bank deducts the appropriate number of Euros depending on the exchange rate on the day when it processes this request and sends the merchant 30 USD. So, the exchange rate on the day that you made the transaction has little to do with the exchange rate that you actually receive.

Dilip Sarwate
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I believe its regular, as it does make economical sense. The transaction exchange rate is fixed when the transaction is posted, and I'm sure there's disclaimer telling you that when you're looking at pending transactions. The bank will only actually pay the money when the transaction is posted, based on the exchange rate at that time. If the exchange rate was different when the transaction was actually made, why would the bank have to bear the difference?

If you do transactions in foreign currency often - consider having an account in that currency (shouldn't be hard to open a USD account in Europe), and then you can chose when to fund it and control the exchange rates. Otherwise - consider hedging against currency fluctuations, that's what large volume traders usually do.

littleadv
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