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Credit Card Fees Increase for Foreign Transactions
http://www.theolympian.com/home/news/20050425/living/132428.shtml
Credit card fees take further swipe at dollar Travelers find overseas trips are rising in cost LAURA BLY GANNETT NEWS SERVICE When Ron Rowell signed up for Juniper Bank's new Sea Miles credit card in hopes of spending his way to a free Carnival cruise, he got something he hadn't bargained for: a 2 percent fee on purchases made outside the United States, even when the souvenirs are priced in U.S. dollars. By the time Rowell received his first bill, that $1,100 black coral necklace and ring he bought during a Carnival stop in Grand Cayman had lost some of their luster. And the retiree from Cape Coral, Fla., was determined to use another card that "isn't a rip-off." Many American travelers using credit cards are discovering that their overseas jaunts are getting more expensive. The culprits: higher card fees combined with changes in the ways purchases made in a foreign currency are converted to dollars. Starting this month, Visa replaced its 1 percent charge for changing foreign currencies into dollars with a 1 percent "transaction fee" that applies to all purchases in another country, regardless of whether the sale is completed in dollars or in a local currency. MasterCard charges 1 percent for foreign currency transactions and nothing if the international purchase is made in dollars, but it has announced a similar fee change effective Oct. 1. Both associations' fees are imposed on the issuing banks, not consumers, though banks typically pass them along. In the past, those fees were simply absorbed into the final price shown on consumers' monthly statements. But after complaints from consumer advocates and a string of lawsuits charging that the practice was deceptive, more credit card issuers are breaking out the fees as separate line items on monthly statements. Several card issuers, most notably Diners Club and MBNA America, are increasing fees, as well. Diners Club charges personal cardholders 3 percent on foreign purchases, up from 2 percent. (Corporate customers still pay 2 percent.) Starting May 25, consumers will pay 3 percent when using an MBNA-issued card abroad, up from 1 percent. Another potentially costly wrinkle: A small but growing number of international merchants as diverse as Harrods and Hertz are cashing in on new technology that lets them convert the price of an item or service from the local currency to dollars. Called "dynamic currency conversion," the process is aimed at travelers who want to know upfront what a cashmere sweater or weekly car rental will be in greenbacks. But that optional convenience costs travelers an average of 2 percent to 3 percent in merchant- imposed fees. And on top of those fees, the credit card issuer may impose its own charges. For example, an unwitting vacationer renting a car from Hertz in Europe this summer and paying in dollars with an MBNA- issued Visa card would wind up paying 5.5 percent on the rental: 2.5 percent to Hertz and 3 percent to MBNA, which charges the bank's own 2 percent fee plus Visa's 1 percent foreign transaction fee. "Now that Visa is charging an across-the-board fee, there's a good chance that more issuing banks will do the same thing," warns Ken McEldowney of San Francisco-based Consumer Action (www.consumer-action.org). The watchdog group conducts an annual survey of credit card fees; the 2005 version should be posted online by mid-June. Rowell, meanwhile, is deep-sixing his newly acquired Sea Miles card in favor of a version that doesn't charge any fees for foreign purchases made in dollars. And he's learning to read the fine print. "Sure, you may be able to earn a free cruise," he says. "But if you're getting whacked with all these extra fees, it isn't free anymore." Plastic's pluses Though the cost of paying with plastic abroad might be rising, experts say it's still the cheapest way to handle big purchases, particularly if you use a Visa or MasterCard from a bank that doesn't add its own surcharge to foreign billings. By contrast, travelers' checks, money exchanged at hotels or airports and credit card cash advances come with hefty fees and often are based on a less favorable exchange rate. For smaller purchases, use an ATM card that lets you withdraw money in the local currency. But bewa Many banks have withdrawal limits and might charge $1.50 to $5 each time you use the card. |
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your.name@here wrote:
Starting this month, Visa replaced its 1 percent charge for changing foreign currencies into dollars with a 1 percent "transaction fee" that applies to all purchases in another country, regardless of whether the sale is completed in dollars or in a local currency. when a France issued Visa card is used to buy something in euros in Germany, does the transaction go though Visa'a USA switches and then back to the french bank, or is there an european VISA switch to handle local transactions ? Would the above fees still be imposed within european nations ? How does AMEX handle intl transactions ? Will it also screw customers, or will it see an opportunity to build a captive niche market of international travellers ? I find it interesting that the credit card companies would screw the very system they just recently instituted (allowing merchants to bill customer in a variety of currencies). FOR US dollar transactions, foreign banks might be able to route transactiosn through their US susidiaries, so the transaction would look "domestic" to americans cardholders, and this would bypass VISA's fees, and let the bank keep all profits from currency exchange. |
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your.name@here wrote:
Starting May 25, consumers will pay 3 percent when using an MBNA-issued card abroad, up from 1 percent. Looks like I'll need a new credit card. Anyone know any that still charge the flat 1% like MBNA has done until now? miguel -- Hit The Road! Photos from 36 countries on 5 continents: http://travel.u.nu Latest photos: Jordan, Turkey, Malaysia, Thailand, Indonesia, Israel |
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your.name@here wrote:
Starting May 25, consumers will pay 3 percent when using an MBNA-issued card abroad, up from 1 percent. Looks like I'll need a new credit card. Anyone know any that still charge the flat 1% like MBNA has done until now? miguel -- Hit The Road! Photos from 36 countries on 5 continents: http://travel.u.nu Latest photos: Jordan, Turkey, Malaysia, Thailand, Indonesia, Israel |
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nobody wrote: your.name@here wrote: [snip] How does AMEX handle intl transactions ? Will it also screw customers, or will it see an opportunity to build a captive niche market of international travellers ? [snip] I can't explain it, because it shouldn't be so, but everytime I've bothered to check, (which means not all of the potential points of comparison) when I compare my Amex charges against my MC charges, I do better with Amex, despite them claiming to charge a higher fee for international transactions. We're talking fractions of a percent here so I've never been particularly interested in figuring it out. But if MC actually follows through, Amex can potentially only get more competetive. This does raise the potential though that ATMs might get cheaper than CC transactions. I pay about $5 per withdrawl and so if I chose to get out say $500 every time, I could probably do better with cash, and my merchants might prefer it too. |
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nobody wrote: your.name@here wrote: [snip] How does AMEX handle intl transactions ? Will it also screw customers, or will it see an opportunity to build a captive niche market of international travellers ? [snip] I can't explain it, because it shouldn't be so, but everytime I've bothered to check, (which means not all of the potential points of comparison) when I compare my Amex charges against my MC charges, I do better with Amex, despite them claiming to charge a higher fee for international transactions. We're talking fractions of a percent here so I've never been particularly interested in figuring it out. But if MC actually follows through, Amex can potentially only get more competetive. This does raise the potential though that ATMs might get cheaper than CC transactions. I pay about $5 per withdrawl and so if I chose to get out say $500 every time, I could probably do better with cash, and my merchants might prefer it too. |
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On Tue, 26 Apr 2005 21:31:22 -0600, your.name@here wrote:
By the time Rowell received his first bill, that $1,100 black coral necklace and ring he bought during a Carnival stop in Grand Cayman had lost some of their luster. And the retiree from Cape Coral, Fla., was determined to use another card that "isn't a rip-off." Hmmmm, 2% of $1100 is $22 - and he is quibbling about it? He wouldn't have bought it if it was $1122? I doubt it. (Not supporting the charge, I think that the ever growing charges and fees on CC's is getting out of hand, just that this was a bad example). Dave ===== NSW Rural Fire Service - become a volunteer today. http://www.rfs.nsw.gov.au/ |
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"Miguel Cruz" wrote in message ... your.name@here wrote: Starting May 25, consumers will pay 3 percent when using an MBNA-issued card abroad, up from 1 percent. Looks like I'll need a new credit card. Anyone know any that still charge the flat 1% like MBNA has done until now? Based on my experience, the USAA MasterCard remains and is likely to continue to be the least punitive (because of it's fairly selective holder profile and the fact that many of them, currently or once commissioned officers, are stationed or travel overseas). For all its other "expensive" benefits, AMEX doesn't look like a bad buy anymore, as the CC issuers jump on the higher charge bandwagon. Rumor has it that several issuing "banks" (and some of them are hardly banks in any sense but the name on the charter, more "small loan companies") got stung badly speculating on dollar/Euro exchanges during the period in which the dollar was declining rapidly. TMO |
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