Image: Showbit

Singaporeans love to shop, and with our world becoming more and more connected, a lot of that shopping is done overseas or online. Now, this is great when you have a credit card, because there are several credit cards out there which reward you for spending in foreign currencies, whether overseas or online. But are these rewards really worth it when you factor in currency conversion costs? How much is your credit card really saving you when you spend in foreign currencies?

First, let’s take a look at some credit cards that reward you for overseas and online spending:

The HSBC Revolution card gives you 5X rewards points for each S$1 spent online, which is equivalent to 2 miles per S$1. You can also convert these points to cash rebates at a rate of about 1.25%.

The Citi PremierMiles card gives you 2 miles for each S$1 spent overseas in foreign currencies and 1.2 miles for each S$1 spent otherwise.

The UOB PRVI Miles card gives you 2.4 miles for each S$1 spent overseas in foreign currencies and 1.4 miles for each S$1 spent otherwise.

The Citibank Rewards card gives you up to 10X rewards points for each S$1 spent locally, overseas or online. That’s equivalent to 4 miles per S$1, but can also be exchanged for cash rebates at a rate of 3,600 points for $10 or about 2.78%.

There are other credit cards that reward you for overseas spending of course, but let’s just look at these four as an illustration.

If we were to put a value on it, how much are these rewards worth?

Before we go further, it has to be said that it’s very difficult to put a value on air miles. Because they can be redeemed for various flights, 1 air mile could be worth anything from 0.5 to 7 cents. For the sake of this article, let’s just assume as an illustration, that an air mile is worth 2 cents each.

This means that for every S$1 you spend online or overseas, the HSBC Revolution card earns you 4 cents, the Citi PremierMiles card earns you 4 cents, the UOB PRVI Miles card earns you 4.8 cents, and the Citi Rewards card earns you up to 8 cents worth of miles.

But that’s not the end of the story!

If you follow us on Facebook, we remind you that every time you use a credit card overseas or online, in foreign currencies, you incur extra charges that are conveniently included in the currency conversion.

Here’s exactly what happens when you use your credit card overseas or online, in foreign currencies:

When you transact overseas, you may be asked whether you want to pay in foreign currency (in US dollars, for example) or in our home currency of Singapore dollars. Let’s see what happens in both cases.

1. Foreign currency – conversion done by the credit card provider

Firstly, if your transaction is in US dollars, it will be directly converted to Singapore dollars. But if it’s in any other currency, it will be converted first to US dollars and then to Singapore dollars. One exception is UOB, which converts US dollars and Australian dollars directly to Singapore dollars.

The main thing to note here is that this double currency conversion usually means extra costs, though with smaller transactions they’re pretty negligible. The other thing to note is that the exchange rate is determined by who did the conversion – usually the credit card provider like Visa, MasterCard or AMEX, but in some cases, may be determined by the bank.

Also, the exchange rate that’s ultimately used may be different from the exchange rate at the time of the transaction. Why? Because the merchant may not have processed the transaction on the same day. This, of course, is out of your control, so you’re at the mercy of volatile exchange rates.

2. Home currency – conversion done by dynamic currency conversion

Does it make more sense to opt for the home currency then? Let’s find out. Using what is known as dynamic currency conversion, you can actually make payment to an overseas merchant in Singapore dollars. In this case, the exchange rate will not be determined by Visa, MasterCard or AMEX, but by the merchant’s dynamic currency conversion service provider.  Not only that, but there are usually additional fees that range between 3% and 3.5%.

Also, as mentioned above, some of the credit card rewards need you to transact in foreign currencies in order to qualify for them.

Speaking of fees, exactly how much do banks charge for overseas and online transactions?

Short answer, it depends on which bank’s card you use.

For Visa, Mastercard and AMEX, their general fee is a 1% charge for foreign currencies overseas after conversion.

However, the banks also have their own fees. If the transaction is in foreign currencies, the admin fee is typically 1.5% for Visa and MasterCard and 2% for AMEX. If the transaction is in Singapore dollars, the fee is 0.8% for Visa transactions, 1% for MasterCard and 2% for AMEX. All fees are calculated after conversion.

However, there are exceptions. For example, when using the UOB PRVI Miles card, the bank’s admin fee is 2.25% of the Singapore dollar amount after conversion, 0.75% more than the typical fee.

So what do all these figures mean?

When you’re overseas and transacting in foreign currencies, you are paying at least 2.5% to 3% in fees, and you may also lose out in the currency conversion process.

If you use the dynamic currency conversion process, you could end up paying anything between 3 percent to 5 percent in fees, and there’s also no transparency in the currency conversion process. Furthermore, you risk not earning any rewards, especially for credit cards that are strict about your transaction needing to be in foreign currencies. So it’s actually costing you more to transact in Singapore dollars when you’re overseas compared to transacting in foreign currencies.

So, assuming your credit card claims to earn you 4 cents for every $1 you spend overseas or online in the form of rewards points or air miles, you’re actually only earning 1.5 cents at best, and actually losing money, at worst.


This post appeared first on the MoneySmart blog. is Singapore’s leading personal finance portal that helps you to maximize your money. Like us on Facebook to keep up to date with our latest news and articles. Compare and shop for the best deals on Loans, Insurance and Credit Cards on our site now!