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Now, before we begin, some things you should know. Here are the websites I used for this explanation and these rates were only valid on September 16, 2005 when I typed this report. Naturally international exchange rates fluctuate, but this should give you a good general guideline. Now, many people use the XE.com Currency Converter website to check out currency exchange rates. This is fine as long as you understand that the XE website uses Mid-Market Exchange Rates for their calculations. So now you're asking..."What the heck is a Mid-Market Rate?" Well banks (Cuban, Canadian, or others) make money by charging a different rate whether you're buying or selling currency. This is the "Spread" on Buy/Sell rates. Note below the Banco Popular de Ahorro website rates and you'll see the difference in Buy/Sell rates shown for the Canadian dollar. At Ahorro, it's an 8 cent spread. By our standards this is quite high as Canadian banks generally charge only a 3 to 4 cent spread between Buy/Sell. This spread difference between Cuban and Canadian banks becomes important later. I've also given you the link and rate for today's Bank of Canada mid-market rate on Canadian/US dollar exchange rates. Sorry, but I couldn't find an online Buy/Sell rate for Canadian Credit Cards so the Bank of Canada mid-rate will have to do for now. One other important fact to remember is that merchants, no matter where they are in the world, are charged approximately 3% service charge by Visa or MasterCard for processing a credit card transaction. Again, this is how banks make their huge profits. In Canada, the merchant generally absorbs this 3% fee as a cost of doing business. However in Cuba, this bank service charge is NOT absorbed and is passed along to you the consumer. Websites where you can check things yourself if you so desire. =================================== Ok, so now you've got all these facts, figures and rates, so what the heck do you do with it to figure out your credit card charges on your Cuban purchases? So we keep it simple and use the example of buying a souvenir for exactly 100 CUC, (Cuban Convertible Pesos). If you bought it in Cash, it would cost you the equivalent of $132.24 Canadian, which you had to pay when you bought your CUC upon arrival in Cuba. When you buy this $100 CUC souvenir on a credit card, it's calculated a little differently. Let's look at how it's worked out. First off, a Cuban Convertible Peso has a value of $1.08 United States Dollars this year (2005). So now 100 CUC + 8% to convert to US dollars = $108.00 USD. Your Canadian bank will of course add a few extra cents charge to this amount because of their Buy/Sell spread but the Canadian bank's spread is far less than the Cuban bank's spread. Some banks also charge an extra service charge for processing foreign credit card transactions and others do not. Check with your own Canadian bank to determine this. So as you can see by this example (2005), it's $132.24 if by Cash and approximately $131.62 if by Credit Card. Let's not quibble about the difference and just call it equal. Credit Card or Cash, there's really no difference in cost. There now, don't you feel better. Steve (YYZ) |
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