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Currency conversion fees hit ATM and debit cards

The handy ATM/debit card you've packed for your big overseas vacation may be packed with fees.

Many banks charge fees whenever a customer uses an ATM/debit card outside the United States.

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Debit cards, such as the Visa Check Card and MasterCard Money, are linked to a cardholder's checking account and can be used for purchases and to withdraw money from overseas ATMs.

Foreign-fee double whammy
Most banks zap customers with $1.50 to $5 fees for using overseas ATMs. And now some major banks are charging customers 2-percent fees for each debit card purchase made while traveling abroad.

These new fees come on top of 1-percent fees long charged by Visa and MasterCard for transactions involving foreign currency.

"If your bank is adding 2 percent it's simply because they see it as a way of getting extra money out of you," says Ed Perkins, a nationally syndicated travel columnist and consumer advocate.

"By the time your bank gets the charge it's already in dollars."

When you make a purchase with a credit card or debit card, you pay an overseas merchant in local currency. But the charge that shows up on your credit card bill or bank statement is in U.S. dollars.

Let's say you take your debit card to Switzerland. When you hand your card to a waiter in Zurich, you're paying for your meal in Swiss francs. Your bank statement will list the cost of your dinner in U.S. dollars.

Visa or MasterCard converts the cost of your meal from Swiss francs to U.S. dollars and charges your bank a 1-percent currency-exchange fee for the service. Many banks pass this 1-percent fee on to customers.

Some major banks are tacking on new fees of their own. Bank of America, Bank One and Wells Fargo are among the banks that charge customers 2-percent fees for each debit card and credit card purchase made overseas.

"There's no cost to the bank," Perkins says. "At that level, it's a pure gouge."

Let's say your bank charges the 1-percent Visa or MasterCard fee for foreign transactions plus a 2-percent surcharge of its own.

And let's say you use your Visa Check Card to buy a $200 pair of shoes in Milan. You'd end up paying $2 to Visa and $4 to your bank for a grand total of $206.

How can you tell if your bank is getting a cut of every purchase you make overseas? Check your customer agreement. If you can't find that, try calling your bank or credit card company.

Still a good deal
Despite these new fees, debit and credit cards are still a great way to pay while traveling.

The exchange rates secured by Visa and MasterCard for debit card and credit card customers are based on wholesale rates offered to large banks and corporations rather than the retail rate offered to consumers. So you're guaranteed an excellent exchange rate each time you pay with plastic overseas.

Many travelers also use debit cards to withdraw cash at overseas ATMs. It's easier and cheaper than exchanging U.S. dollars at an overseas bank or exchange counter.

"It's a cleaner process. You know you're going to get the best rate and you know you're not going to have any troubles," says Joel Widzer, author of The Penny Pincher's Passport to Luxury Travel. "You get your best deal at an ATM in that country."

And while Visa and MasterCard charges a 1-percent fee for its service, a bank or exchange counter is likely to charge fees of 5 to 8 percent.

So you'll get a better exchange rate and pay less in fees when you withdraw $100 worth of francs from an ATM outside a bank in Paris. Step inside the bank and exchange $100 in cash for French francs and you'll end up paying a higher exchange rate and higher fees.

Another great thing about ATMs is you can find them just about everywhere, especially in Europe.

"ATMs are all over the place including major airports," Perkins says. "I haven't seen a European airport that doesn't have ATMs around."

The Web sites of Visa and MasterCard list ATM locations in countries around the world.

Can't escape those surcharges
Withdrawing cash at overseas ATM may be the cheapest way to get foreign currency while traveling, but it's not as good of a deal as it used to be. The reason? Those dreaded ATM surcharges.

Most bank-owned ATMs outside of the United States do not charge fees. But there's a good chance your own bank will zap you with a fee when you withdraw cash at an overseas ATM. Fees range from $1.50 to $5.

National City, SunTrust and Bank One all charge customers a $1.50 fee for using another bank's ATM.

"It doesn't matter if it's down the street or across the Atlantic," says Robin Yocum, a spokesman for Bank One. "It's going to be $1.50."

At Citibank, ATM fees vary based on the customer account.

"If you pay $1 to use someone else's ATM normally then you'd pay the same overseas," says Mark Rodgers, a spokesman for Citibank. "If you normally don't pay those charges you won't pay them overseas."

With First Union's Custom Banking and Prime Banking checking accounts, you get two free visits to a non-First Union ATM each month. First Union's College Express checking account allows four free visits to a non-First Union ATM each month. Once the free visits are used up, an overseas traveler would be charged a $1.50 fee per ATM withdrawal.

Bank of America's ATM policy may be the most confusing and costly of all.

First the good news. Beginning July 1, customers of Barclays in the United Kingdom, Deutsche Bank in Germany, Scotiabank in Canada and Westpac in Australia and Bank of America will have free access to each other's ATMs when they travel. A free visit to another bank's ATM is always a nice thing.

But things aren't so nice when a Bank of America customer withdraws cash from an ATM outside the Global ATM Alliance. Bank of America charges a 2-percent fee plus a $1.50 to $3 fee each and every time a customer uses an overseas ATM that is not in the alliance.

A Bank of America customer who withdraws $100 in British pounds from a non-Barclays ATM in London could end up paying as much as $5 in fees. Ouch.

Finding ways around the fees
To limit ATM fees while traveling, consumer experts urge people to make one or two large withdrawals as opposed to five or six smaller ones. Most banks limit ATM withdrawals to $200 or $300. You may want to ask your bank to raise this limit before you head abroad.

What should you do if you have lots of local currency and are about to leave the country? Widzer suggests paying your hotel bill with the leftover cash.

Be sure to check out the overseas fee policies on your credit and debit cards before taking off on your trip. Pack cards with the most traveler-friendly policies. The money you save is well worth a few phone calls.

"Be as informed as possible," says Don George, travel editor for Lonely Planet Publications. "You can make the best deal for yourself that way."

Editors' note: Please also see our newest story on the topic of currency conversion.


-- Posted: June 25, 2001




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