MasterCard Will Expand Fees On International Transactions

MasterCard Will Expand Fees
On International Transactions

By JENNIFER SARANOW
Staff Reporter of THE WALL STREET JOURNAL
April 20, 2005; Page D2

Using a MasterCard abroad is about to get more expensive for many
consumers.

MasterCard International Inc. says it plans to charge fees for all card
transactions abroad, not just those where it converts to dollars
purchases made in a foreign currency. Earlier this month, Visa USA Inc.
started levying a 1% fee on every charge made outside a cardholder's
country. American Express Co., meanwhile, charges a 2% fee for
transactions abroad where currency conversion occurs.

MasterCard says that starting Oct. 1, it will charge issuers a fee of
0.8% on all transactions when the card holder and merchant are from
different countries. The company also plans to levy an additional 0.2%
whenever a merchant's foreign currency needs to be converted. The new
fees apply to users of both MasterCard credit and debit cards, and
include ATM withdrawals and debit-card purchases.

Previously, when someone used a MasterCard or Visa while traveling
abroad, the companies added only a 1% fee for purchases that required
currency conversions. The banks that issue credit cards would frequently
add their own fees, resulting in total currency-conversion charges as
high as 3% in some cases. But travelers previously could avoid those
fees by shopping at a growing number of foreign merchants that allowed
travelers to use their cards to pay in dollars. For example, a
car-rental agency in Europe would figure out the cost of a rental in
dollars, and charge your card that amount. Merchants, however, charge a
fee for doing that.

The new MasterCard fees will be charged directly to the issuer and as a
result, won't show up on credit-card bills as part of the transaction
amount. If the issuers decide to pass along the fees, consumers could
face fees from both the merchant and the card issuer for the same
transaction if the transaction is done in dollars.

Some banks such as J.P. Morgan Chase & Co. are choosing not to pass
along the new fees and plan to continue to charge consumers only for
purchases where MasterCard converts the currency. However, other
issuers, including MBNA Corp., HSBC Holdings PLC and Capital One
Financial Corp., plan to begin charging fees for all MasterCard
transactions abroad.

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"Dan Epstein" wrote in message
...
MasterCard says that starting Oct. 1, it will charge issuers a fee of
0.8% on all transactions when the card holder and merchant are from
different countries. The company also plans to levy an additional 0.2%
whenever a merchant's foreign currency needs to be converted. The new
fees apply to users of both MasterCard credit and debit cards, and
include ATM withdrawals and debit-card purchases.

Previously, when someone used a MasterCard or Visa while traveling
abroad, the companies added only a 1% fee for purchases that required
currency conversions.

In other words, the charge will stay the same unless the currency is converted
by the retailer at the POS. With the exception, I guess, for people travelling
in a foreign country where the currency is the same, eg Euro zone.

The banks that issue credit cards would frequently
add their own fees, resulting in total currency-conversion charges as
high as 3% in some cases. But travelers previously could avoid those
fees by shopping at a growing number of foreign merchants that allowed
travelers to use their cards to pay in dollars.

They avoid one fee and pay another! IME it is significantly more expensive to
let the retailer do the currency conversion.

For example, a
car-rental agency in Europe would figure out the cost of a rental in
dollars, and charge your card that amount. Merchants, however, charge a
fee for doing that.

Yes, and typically more than the bank and MasterCard together would have charged
for converting the currency.

The new MasterCard fees will be charged directly to the issuer and as a
result, won't show up on credit-card bills as part of the transaction
amount. If the issuers decide to pass along the fees, consumers could
face fees from both the merchant and the card issuer for the same
transaction if the transaction is done in dollars.

So do the transaction in the local currency. You're probably better off doing
this anyway. Many retailers seem to convert the currency without first asking
the customer as they are supposed to (since AIUI they get a cut of the currency
conversion fee). You don't have to accept this and can demand to be charged in
the local currency.

ISTM all this is about MasterCard and VISA losing much of their currency
conversion markup due to the increased tendancy for retailers to convert the
currency at the POS. If these new charges by MasterCard and VISA reduce the
rip-off of dynamic currency conversion at the POS, then I'll be happy.

--
Andy