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Cutting currency conversion charges

Dr. Don TaylorDear Dr. Don,
My MBNA card just announced that it, too, is going to soon charge that usurious 3-percent fee on foreign money credit card purchases. Are there any banks or credit companies that will buck the trend and not charge us for charging outside the country? Thanks.
-- Baron Bucks

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Dear Baron,
MBNA is increasing its currency conversion fee in May from 1 percent to 3 percent. A USA Today article has more on the changes in this card and others, including some cautions about why you shouldn't use dynamic currency conversions, or DCC, when buying items abroad.

The credit card companies and provider banks got into legal trouble a couple of years ago by not adequately disclosing currency-conversion fees. The legal wrangling isn't over, but the fees are now disclosed and consumers are trying to find a way around paying them. The key is that Visa and MasterCard charge issuing banks the fee, and the issuing banks then typically pass through this fee to customers and add to it an additional fee of their own.

Here's what Visa says on its Web site concerning these charges:

Effective April 1, Visa will assess a 1% International Service Assessment (ISA). The ISA is not a currency conversion fee but rather a charge to issuing banks when transactions use the global payment system. The ISA will also be charged to Issuers on same currency, cross-border transactions like DCC. Visa will no longer charge issuing banks the 1% Multicurrency conversion fee. It is important to note that Issuing banks determine the cardholder pricing structure. Some banks charge mark-ups for same-currency cross-border transactions; others do not. If you frequently travel internationally, the different pricing structures charged by issuing banks should be one of the factors you take into consideration when you select the Visa card that best suits your needs.

MasterCard has similar provisions that will take effect in October.

Finding a financial institution that doesn't pass through the ISA charge is unrealistic, but finding a financial institution that doesn't tack on any additional fees shouldn't be impossible. Check back with this site. Bankrate is working on a story about currency conversion fees that will include a chart listing the cards that do and do not include the fee.

If you are a member of a credit union, or qualify to join a credit union, ask that institution what they charge for currency conversion fees on their credit cards.

The argument for still using the credit card is that you're getting an exchange rate not available in retail currency transactions and you're not paying as high a service charge as you would experience in exchanging currency at an airport or bank.

Using a debit card may be a lower-cost alternative to using your credit card, but you need to compare the currency surcharges on these transactions and consider any ATM surcharges as well.

-- Posted: May 20, 2005





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