This has been a debate for a while in the expat community, and I wanted to know as well. So, what better way to find out than just to do it. I wanted to make sure I was buying the exact same thing and have a control for each one. So what I did was I used a local restaurant to purchase 6 of the same food items, so that the total would be the exact same each time. The price charged by the restaurant was the same every time, 38,900COP. However my charges varied wildly.
I used 3 different cards just to be sure that the I was seeing a wide variety of conversion rates. I used a Bank of America debit card, a Chase Credit Card, and a PayPal Debit card. All of the charges were done with a Redeban credit card processor and using Apple Pay on my phone. Here are the results.
Bank of America Debit
The first 2 transactions, we’re using my standard Bank of America debit card. When they ran the charge in Pesos, My B of A account was charged $10.82, which equates to an exchange rate of $1USD/3592COP. When they charged me in USD, the charge to my B of A account was $10.36, which equates to an exchange rate of $1USD/3760COP.
The next 2 transactions, I used my PayPal debit card. When they ran the charge in Pesos, My PayPal account was charged $10.91, which equates to an exchange rate of $1USD/3563COP. Which if you are taking score at home, is 9 cents more, due to a fluctuation of what Redeban offered to me as a exchange rate. It was literally an hour apart, but the rate changed that much. When they charged me in USD, the charge to my PayPal account was $10.34, which equates to an exchange rate of $1USD/3755COP. Very similar to the rate that I got from my Bank of America debit card. You’ll also notice that the fluctuation that Redeban used did not affect this rate in the same way. Redeban’s exchange rate made the dollar weaker, but using the American bank to process the charge was slightly stronger at the same time.
Chase Freedom Credit Card
The last 2 transactions, I used my Chase Freedom credit card. Credit card companies, especially travel-centric cards, typically offer the closest to median exchange rates you will find, so I have the most hope for this one. The charge was made one hour from the PayPal charges, just to ensure consistency. When they ran the charge in Pesos, My Chase account was charged $10.97, which equates to an exchange rate of $1USD/3546COP. This means that every hour the dollar weakened against the Colombian Peso in the eyes of Redeban. When they charged me in USD, the charge to my Chase account was $9.86, which equates to an exchange rate of $1USD/3944COP.
My conclusion is simple. If given the option, always let your financial institution do the exchange. Redeban appears to be changing the rate of exchange to favor them. Which is sketchy at best, but unethical at its core. Of course your best bet is to have a Colombian bank account with a little money in it so that you can spend on things like this and YOU choose the exchange rate. But knowing this isn’t an option for all is why I wanted to tackle this. I also know what I will be eating for the next 3-4 days as well.