Online Shopping Tip: Exchange Rates

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This is another common question or concern for many online shoppers and I find that some people put it in the too hard basket and so that’s why they shop locally. But with so many overseas retailers marketing Australian shoppers, the online shopping experience has become so much easier in many aspects – shipping, returns, customer service and exchange rates.

Basically, when buying from overseas retailers, there are 3 possible exchange rate scenarios when paying for your purchases:

1. Credit cardcc

The conventional way of purchasing goods online and probably still the most common. The total amount you will pay for is denominated in the foreign currency which means that the final amount you actually pay for in Aussie dollars is not known until the charge come through on your credit card. It is the exchange rate at the date the charge is processed so will fluctuate (hopefully not a lot though!). The downside – and for me, this is a big downside – is that most credit card companies charge an exchange rate conversion fee and is typically 3% of your purchase amount. Buy something for $1,000 and that’s extra $30 going to the bank for no reason!

2. Paypalpaypal

Most of us will have used Paypal at least once buying something from eBay. When purchasing overseas in foreign currency using PayPal, there are 2 options and PayPal will ask you which option you prefer. The first is they will offer you a fixed exchange rate at the time so you know exactly how much you are paying in AUD. I find that the exchange rate offered is  slightly lower than what current market rates are. OR, you can choose the exchange rate the credit card will offer you at the time of processing (i.e. going back to scenario 1). Both will charge you conversion fees – for me PayPal is higher at 3.4%.

3. FiftyOne

This is the new way of shopping on US sites – especially the big department/chain stores. This bloomieseCommerce tool allows retailers to offer us their goods in our local currency – so say you go to Bloomingdale website, if you select Australia as your country, you will see prices in AUD. When you checkout, shipping will be added as well as any applicable duties and taxes so that you pay an all inclusive price in AUD and know exactly how much you are paying. It’s so easy that newbies can purchase online from overseas stores without any confusion. Shop away!

Different overseas retailers offer different options so make sure you  know how you will be paying for the goods and how your exchange rate will be calculated – just so you don’t get any nasty surprises when the credit card statements comes through. I say I loath the extra 3% conversion fee that goes to the banks but I’m still a sucker for buying overseas and the savings I get more than make up for the extra I have to pay…

Let me know if you have any questions and I’ll try my best to answer. Hopefully this is a good basic guide to exchange rates and happy smart shopping!


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