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My credit card account is maintained in AED (United Arab Emirates Dirham). I have made a payment of 2,760 GBP to a hotel in London, which is equivalent to 13,037 AED. I later had to cancel the booking and was surprised to see a refund of 13,130 AED against the refund of 2,760 GBP. I have gained 93 AED from the refund. Also, I have learned that the hotel has refunded the amount in GBP.

My question is, how is it possible? Who is bearing that 93 AED additional amount I have received which obviously is not the hotel.

  • The exact opposite situation happened to me with a transaction in Japan. (helped by the fact that businesses tend to charge at the end of the month there) Ended up being charged 70 USD extra than what it would have been on the actual purchase date. – Z. Cochrane Mar 9 '17 at 23:19
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    There is no additional amount. The 13,037 AED you paid has the same value as the 13,130 AED you got back. – David Schwartz Mar 10 '17 at 4:57
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My question is, how is it possible? Who is bearing that AED 93/- additional amount I have received which obviously is not the hotel.

Short answer, it is the Fx market.

When you charged GBP 2760, via exchange the Visa/MasterCard network along with a spread from Banks, purchased this in Fx Market. The person/institution who sold them GBP 2760 asked for AED 13037. That is what you got charged.

When the Hotel reversed the charge, they returned GBP 2760, the Visa/MasterCard network along with a spread from Banks, sold this in Fx Market. The person/institution who purchased GBP 2760 gave for AED 13130.

Note: In this case it has worked to your advantage. It can also work against you if the rates go the other way.

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    I'll admit I'm mildly surprised the bank gave S.H.A the difference back instead of just refunding 100% of the initial payment and pocketing the difference. – Dan Neely Mar 9 '17 at 13:35
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    @DanNeely These days banks don't want to take FX risk. So if they are doing at actual, they need to do all the time and can't be selective, .ie pocket when positive and charge customer when negative. – Dheer Mar 9 '17 at 15:23
  • Fx = Foreign exchange? – user48477 Mar 10 '17 at 2:12
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    @FighterJet Yes that is right. Fx = Foreign Exchange. – Dheer Mar 10 '17 at 3:45
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This is possible because the exchange rate changes from minute to minute.

The other lesson here for you is that it can hit you in the other direction. Next time you might have a loss instead of a gain.

Currency risk is a part of your life whether you realize it or not. In this case you are seeing to currencies interacting, but even in your own currency, there is inflation (or more rarely, deflation) happening that most people don't see or pay attention to. This affects the value of your money over time.

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    Yes, currency risk often flies below the radar. – SlowTalk Mar 9 '17 at 16:29
  • @SlowTalk it is hard to measure. FX is most of the time not different than betting on slug races. Except the slugs change heading every 2 seconds. – Mindwin Mar 9 '17 at 17:06
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    Has the OP (accidentally) made a taxable profit in currency trading? – DJohnM Mar 9 '17 at 18:48
  • @DJohnM Funny, but since the OP's transactions were for the same number for GBP, I doubt that will count as a profit in his tax jurisdiction ;) – NL - Apologize to Monica Mar 9 '17 at 21:52
  • Or perhaps the first conversion to pounds marked the end of one currency speculation in AED Dirham, and the refund converted to AED Dirham marked the start of another... – DJohnM Mar 10 '17 at 0:49

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