Hidden fees on foreign credit card charges
Attention travelers: Your credit card issuer
could be charging you an extra 2 percent on every credit card purchase
you make outside the United States, even though it does nothing
to earn the money.
Many banks are charging fees
for "converting" purchases made in foreign currencies into U.S. dollar amounts.
you hand a credit card to a waiter in a Parisian cafe, you're paying for your
meal in euros. But the charge that shows up on your credit card bill is in U.S.
dollars. Many banks are charging customers 1- to 3-percent fees for this service.
"The thing is a complete gouge. By the time the
issuing bank in the U.S. gets the charge it's already in U.S. dollars," says Ed
Perkins, a nationally syndicated travel columnist and consumer advocate.
"It's the international Visa
and MasterCard associations
that actually make the exchange. They pay out pounds or whatever
it is and get back dollars from the U.S. issuing bank."
American travelers already pay for this
exchange service. Visa and MasterCard levy 1-percent currency-exchange fees on
transactions made abroad. The card associations bill the issuers, and many issuers,
in turn, bill customers.
And many banks tack an additional 1- to 3-percent fee on every
credit card purchase made overseas.
1 or 2 percent of greed, really," says Linda Sherry, editorial director at Consumer
Action, a consumer advocacy organization based in San Francisco.
say your bank charges the 1-percent Visa or MasterCard fee for foreign transactions
plus a 2-percent surcharge of its own.
say you use your Visa card to buy a $300 leather jacket in Rome. You'd end up
paying $3 to Visa and $6 to your bank for a grand total of $309.
these fees won't be listed anywhere on your Visa bill. It will simply read "$309"
next to the name of a shop in Rome.
no idea that you were coughing up $9 in fees unless you did some serious digging
prior to your trip. And the banks charging these fees know it.
they're doing it because they can hide it in the foreign exchange and they can
get away with it," Perkins says.
recognize a padding of bills in U.S. dollars."
How can you find out if your bank is taking a cut on every
purchase you make overseas? Grab a magnifying glass and pull out your cardholder
agreement. If you've had a card for a while, your bank may have popped in a fee
notice with a bill.
"It's in the fine print that
you get. But how many people keep that, let alone read it?" Perkins asks.
best bet is to call your bank and ask about the surcharges. Be sure to ask about
fees on debit cards and ATM cards, as well.
of America charges a 2-percent fee each time a customer uses an ATM card, debit
card or credit card outside the country. Card customers pay the 1-percent conversion
fee from Visa and MasterCard, as well. Bank of America also charges a $1.50 to
$2.50 fee each time a customer uses an overseas ATM.
Other issuers charging a 2-percent surcharge
on foreign transactions on top of the 1-percent charge from Visa
and MasterCard include Citibank, Bank One/First USA, Chase, Providian
and Wells Fargo, according to a phone survey by Bankrate.com.
Who's not charging these sneaky fees? A handful of big issuers and lots of smaller
Capital One, MBNA America, FleetBoston and
Wachovia Bank are not charging extra fees on foreign transactions at this time.
None of the nation's credit unions charge these
kinds of fees. Most community banks don't either.
of our banks charge foreign currency conversion fees," says Scott Broughton, senior
vice president of business development for ICBA Bancard, the credit card subsidiary
of the Independent Community Bankers Association.
leave home without calling
Because fee policies have the tendency to
change, it's a good idea to contact your bank and credit card issuers a couple
of weeks before an overseas trip.
"Check before your trip on each card you're
thinking of using," says Edward Hasbrouck, author of "The Practical
Nomad: How to Travel Around the World."
you call your bank or credit card issuer, there's a strong possibility of getting
misinformation if you don't probe carefully ... You've got to ask a lot of questions.
You've got to probe for all possible kinds of charges."
be surprised if a customer service rep passes you off to someone else.
may have to call three or four different people because the first person may not
know," Perkins says.
Be persistent. Once you've
tracked down the fee policies for all the different kinds of plastic in your wallet,
you'll be able to decide which cards to take with you and which ones to leave
You'll definitely want to bring a card or two
on your overseas adventure. Credit
cards are still a great way to pay while traveling.
Exchange rates offered by credit cards
are better, often a lot better, than those offered at a currency exchange counters
and even at overseas banks.
The reason? The exchange
rates secured by Visa and MasterCard are based on wholesale rates offered to large
banks and corporations rather than the retail rate offered to consumers. Ditto
for exchange rates on debit cards, such as the Visa Check Card and MasterCard
Even with those pesky surcharges thrown
in, paying with plastic is still cheaper than converting cash overseas.
or foreign currency exchange dealers swap your dollars at less-favorable "consumer"
rates of exchange, plus they charge fees of their own. The bank fees vary widely;
the exchange dealer's fees run 7 percent or more. The same thing happens with
"When you exchange cash or
traveler's checks you're going to lose a minimum of 5 or 6 percent and probably
more than that," Perkins says.
Paying for a travel
adventure with a credit card or debit card is still a smart way to go. It's just
not quite the deal it used to be, thanks to those sneaky fees.
Editors' note: Please also see
our newest story on the topic of currency