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My credit card account is maintained in AED (United Arab Emirates Dirham). I have made a payment of 2,760 GBP to a hotel in London, which is equivalent to 13,037 AED. I later had to cancel the booking and was surprised to see a refund of 13,130 AED against the refund of 2,760 GBP. I have gained 93 AED from the refund. Also, I have learned that the hotel has refunded the amount in GBP.

My question is, how is it possible? Who is bearing that 93 AED additional amount I have received which obviously is not the hotel.

Dai
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S.H.A
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2 Answers2

38

My question is, how is it possible? Who is bearing that AED 93/- additional amount I have received which obviously is not the hotel.

Short answer, it is the Fx market.

When you charged GBP 2760, via exchange the Visa/MasterCard network along with a spread from Banks, purchased this in Fx Market. The person/institution who sold them GBP 2760 asked for AED 13037. That is what you got charged.

When the Hotel reversed the charge, they returned GBP 2760, the Visa/MasterCard network along with a spread from Banks, sold this in Fx Market. The person/institution who purchased GBP 2760 gave for AED 13130.

Note: In this case it has worked to your advantage. It can also work against you if the rates go the other way.

Dheer
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This is possible because the exchange rate changes from minute to minute.

The other lesson here for you is that it can hit you in the other direction. Next time you might have a loss instead of a gain.

Currency risk is a part of your life whether you realize it or not. In this case you are seeing to currencies interacting, but even in your own currency, there is inflation (or more rarely, deflation) happening that most people don't see or pay attention to. This affects the value of your money over time.

NL - SE listen to your users
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