Why is ebay charging 3.7 % instead of 3% to exchange my moneys canadian to us funds.

[girlytoo]

Why is ebay charging 3.7 % instead of 3% to exchange my moneys Canadian to US funds.

It's the principle of it not the money. Purchase price was  4.38 US which is 5.63 ca (rounded to the higher) at XE Currency Converter. (which was the same as ebay) I was charged 5.84 Canadian.

5.63 x 3 %    = .17     5.63 +  .17= 5.80 I thought it should have been.

5.63 x 3.7% = .21     5.63 + .21 = 5.84 This is what I was charged.

Like I said it isn't the moneys in my case because it is only 4 cents but if this was thousands of dollars I would be a little put off.

Is there another fee that Ebay charges that I am not aware of?

I wonder how they got this.

Thanks in Advance

No is the price of money I checked XE very reputable and Ebay did have the same figure.

[karspeed]

For CAD <-> USD, eBay is currently charging 0.7045. 

While the market mid rate is 0.7534. (xe.com)

So eBay is charging roughloy 500 pbs or 5% on ONE side of the transaction.

By comparison, credit card companies are usually around 2.5 - 3%.

eBays rates are about on par with corner store Foreign Exchange shops, and airport.

Basically a rediculous markup.

So eBay charges an additional 2-2.5% more than credit cards.

if you need to exchange funds, do it through your credit card.

eBay (and many other firms) offer this as a "Convenience" to customers.

However, it is a huge profit centre.  Capitalizing off clients who dont know.

Consider in an average day (and I am making up these numbers just to explain)

If:

Canadians buy $2m worth of US items.  eBay earns $100k.

If Americans buy $2m worth of CDN items, eBay earn $100k

Do they go to the bank and exchange any of this?  No.

Because all this FX nets out to ZERO

Its 100% profit. Very little risk.

(BTW - I used to run a foreign exchange desk for major company.  Did this all day long for years)

OK

The example above is a bit too perfect, because the buys & sells will never offset perfectly.

So assume a real life scenario:

CDNs buy $2m, ebay earns $100k

Americans buy $1m, ebay earns $50k and is left with $1m to convert.

Their rate, at the bank is about 20-50 bps (0.2 - 0.5%) on $1m.  so their expense is ~$5k

So:

Revenue: $150k

Expense: $5k

Its awesomely profitable business.

Very few businesses that generate this kind of ROI