The worst part of it is that the fees are hidden, and to add insult to injury, the bank markets itself to world travelers ("the world's local bank.")
I have been on and off living in Brazil for the past year. When I use my Well Fargo bank card in the local ATM machines here, Wells Fargo charges $5 for each transaction!
OK, so I thought I'd be clever, and open a new HSBC account back in the United States, since there are local, convenient HSBC machines in my neighborhood in Brazil. As an experiment, I used my Wells Fargo ATM card and my new HSBC ATM card to withdraw the same amount of money, at the same time.
Wells Fargo ATM card
Withdrawal amount: R$ 650 BRL
Deducted from account: $ 403.50 USD
Non-Wells Fargo ATM Fee: $ 5 (this is on top of the $403.50)
HSBC ATM card
Withdrawal amount: R$ 650 BRL
Deducted from account: $ 416.17 USD
No ATM Fee
But even without the ATM fee, I was still coming out behind with the HSBC card! I had no idea that the currency exchange rates could vary so wildly between banks. And it seems extremely devious of HSBC, which markets itself as a bank for world travelers, to rip off consumers with such bad exchange rates. The truly worst part of it is, it is totally hidden. You don't even know you are getting a bad rate, and you would likely never even notice how bad it is. In fact, the receipt that the HSBC ATM machine issued did not even tell me how much, in USD, was being withdrawn -- I had to go look online a day or two later. Tricky indeed!
Going into more depth, the interbank exchange rate, for USD->BRL, on June 24, 2008, according to Oanda.com, was 1.61330. So, the 650/1.61330 = 402.90. Which makes it seem like Wells Fargo was converting the currency essentially at the interbank rate, while HSBC charged 3.3% over the interbank rate! And the WFB website appears to back this up: they mention the $5 ATM fee, and a 3% fee for purchases made with the ATM in foreign currencies, but they do not (yet) have a surcharge for currency conversion.
The BBC has reported that HSBC's exchange fees are unfair and getting worse. Apparently they charge 2.75% for the exchange, plus 1.5% (and now 2% as of July 7) for the foreign ATM. I am unclear on whether this is charged when using foreign HSBC ATMs. Either way, the numbers don't lie. HSBC is giving me a truly bad deal. I am better off using my Wells Fargo card and withdrawing large sums, to offset the $5 ATM usage fee.
