Ombudsman cautions on spending overseas

The banking ombudsman is advising that people are likely to pay more for their purchases while overseas if they choose to pay in New Zealand dollars when using their credit cards.

Deborah Battell today said her office had received complaints indicating that paying in the home currency of the credit card user may cost travellers or online purchasers more.

"Our inquiries have revealed that complainants were likely to be right about purchases costing more," Ms Battell said.

It was becoming increasingly popular for merchants overseas -- such as retailers, accommodation providers and restaurants -- to offer travellers the option of paying for purchases in the currency of their credit cards.

So holders of New Zealand credit cards could elect to be charged in NZ dollars. Some companies also let people pay for online purchases in their own currency.

Her office had also received complaints that some overseas merchants were not offering travellers a choice, and were simply processing transactions in NZ dollars, Ms Battell said.

"Presumably this is because they can make an additional margin on the sale."

Exchange rates were set by the relevant credit card company, but currency conversion fees -- additional fees charged for converting foreign currency into other currencies -- were set by merchants, including banks.

In New Zealand, banks typically charge between 2 percent and 3 percent of the NZ dollar amount.

"The main advantage of paying in your home currency is that you know what you will actually pay at the time you make the purchase. However, from our experience you are likely to pay more for the privilege as currency conversion fees are typically higher," Ms Battell said.

Before going away, card holders should find out the currency conversion fee charged by their bank, then before a transaction was processed they should ask the overseas merchant what their conversion fee was.

If the overseas merchant's conversion fee was higher, or they would not say, card holders should ask to have their credit card charged in the country's currency rather than NZ dollars.

If a merchant insisted on charging in NZ dollars, customers could decide whether to go ahead with the purchase or shop elsewhere.