Surcharges on credit card purchases in foreign currencies

Bankrate.com
Are you overcharged for overseas purchases?
Friday June 24, 6:00 am ET
Kristin Arnold

Your credit card company is making a killing off the money you spend on
your foreign vacation, and you might not even know it.

This extra profit is called a "foreign currency-conversion fee," and you
could be paying up to 4-percent extra when you make an overseas purchase
with a credit card.

One percent of that charge comes from the Visa or MasterCard networks,
which charge a 1-percent fee for converting your foreign-currency
purchase into American dollars.


On April 1, Visa replaced its 1 percent currency-conversion charge with
a 1 percent "transaction fee." MasterCard plans to start charging the
same transaction fee starting Oct. 1, replacing its current 1-percent
currency-conversion charge.

No matter what you call it, it's a good deal. Changing your money in
almost any other manner will probably cost you a lot more.
But many credit card issuers and banks are cashing in by adding a 2
percent to 3 percent charge on top of that 1 percent without doing a
thing to earn it.

"Banks have been making a profit off their customers for a long time,
while providing no service," says Linda Sherry, the editorial director
for Consumer Action in Washington. "Visa and MasterCard are doing all
the work; it's simply pure profit for banks."

Ed Perkins, syndicated travel columnist and author of "Business Travel
When It's Your Money," agrees.

"People who travel to foreign countries are outraged by this charge.
It's pure gouging that credit card companies know they can get away
with," he says.

Bankrate contacted four credit card issuers -- Bank of America, MBNA,
Citibank and Chase -- to get an explanation for the additional charge.
All refused to explain the reason for the charges.

Few banks actually list currency-conversion fees on credit card bills.
Most banks add the conversion fees into the transaction prices listed on
customer bills -- never actually showing customers the rates they charge.
The charge varies from card to card, but major credit card issuers such
as Citibank, Bank of America, JP Morgan Chase and MBNA charge 2 percent
on overseas purchases. Add that to the 1 percent Visa and MasterCard
charge for the actual conversion and you will pay an additional $3 for
every $100 you spend.

So that $300 pair of shoes you bought in Milan, Italy, will show up on
your statement as $309 because Visa or MasterCard got its 1 percent cut
charging you $3, while your credit card added its 2 percent by tacking
on $6.

That failure to disclose is starting to change due to recent lawsuits
brought by consumers who say that their credit card company failed to
adequately disclose currency-conversion fees on their credit card
statements. Some credit card companies have now issued statements
identifying the currency-conversion fee and how much their cardholders
will be charged.

"I think the breakout of the fee could have an impact on the market,"
Sherry says. "Consumer outcry could cause some banks to lower their fee
or do away with it."

But until that happens, shop around for a credit card like Capital One,
which doesn't charge a currency-conversion fee on top of the Visa or
MasterCard charge.

Perkins says that some credit cards are going a step further by charging
you a currency-conversion fee on items already listed in U.S. dollars.
"You can buy something from your home in the U.S. from a merchant
overseas, who has already converted your purchase into U.S. dollars, but
some credit card companies will still charge you a conversion fee. It's
just ridiculous."

More than meets the eye

Some overseas merchants now offer to convert your bill into your home
currency. This is called "dynamic currency conversion" and it means the
merchant -- and not your credit card issuer -- is converting the
currency.

If you think you are getting a deal because there will be no
currency-conversion charge, think again. The merchant is converting your
money for you, charging a percentage for the service, and passing along
that charge to you through his merchandise.

Perkins warns travelers to be very weary of dynamic-currency conversion.
"Right now, it's not a good deal," he says.

"Overseas merchants can gouge you by charging 5 percent or 6 percent to
convert your purchase into U.S. dollars. Add the 1-percent Visa and
MasterCard charge, plus what your credit issuer charges, and you are
taking two hits instead of just keeping your purchase in local currency
and taking one hit from your credit card."

Perkins says there have not been any set dynamic-currency-conversion
charges, so many merchants are taking advantage of gullible travelers.
"Visa and MasterCard are also doing their share of gouging by charging
you for something you already paid for, just because they can."
Better ways to pay?

So, what is the best course of action to avoid the charges?

Sherry recommends prepurchasing airline tickets, hotel rooms and rental
cars before leaving the United States to avoid the charge.

"I think a lot of consumers get hit hard when they dine out and shop.
That part is unavoidable, but most everything else can be purchased
before you travel overseas."

Also keep in mind that debit cards are just as handy as credit cards
when making purchases overseas, and some of the banks that charge
3-percent conversion fees do not charge for purchases made on a debit
card. According to Perkins, even some small banks and credit unions do
not charge for conversion fees.

Tips on getting the best deal

Here are some money-saving tips you can use for your overseas vacation.
Look for credit cards that do not have a currency-conversion fee.

Travel with stored-value cards issued by Visa, MasterCard and American
Express. These cards have upfront charges but will save you from being
charged the conversion fee on each purchase.

Using a bank or debit card is often the best way to go, because many do
not charge conversion fees.

travelers' checks are still popular, but you will be charged a fee
(usually around 7 percent) and will still pay on the conversion.
However, you can shop around to find a better exchange rate and a lower
fee.

Don't convert money from one currency to another more than once.
Also, don't exchange money at airports or hotels. They charge the most.

The bottom line

Most experts agree that despite the conversion fees, using plastic
abroad is still the cheapest way to make purchases, especially when you
consider hefty charges on travelers' checks and money exchanges.

"Exchange rates offered by credit cards are better because 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," says Jessica Iben of Chase Card Services. "Credit
cards also provide increased protection on any card purchase since card
members are never liable for unauthorized purchases."

Perkins agrees: "Credit cards may not be the best deal they used to be,
and we hate to be price-gouged, but paying with plastic is still the
smart way to travel overseas."

http://biz.yahoo.com/brn/050624/16435.html?.v=1

Thanks for sharing-

I had this arguement with the customer service (if you can call it
that) rep from MBNA.

First off, I got my bill from them postmarked AFTER the due date- and
they charged me a late fee. I tried to explain this to the woman- but
she didn't seem intelligent enough to understand the problem- nevermind
offer a solution. I think their motto is- it is the customer's
fault!!!

Secondly, I think she was suprised to learn that there were multiple
currencies in the world. She didn't quite grasp the concept of
Austalian dollars not being equal to American dollars. They are both
dollars she told me. After 15 minutes of this- I gave up- I will pay
their fees and try Capital One- unless anyone else has any
suggestions.....





poldy wrote:
Bankrate.com
Are you overcharged for overseas purchases?
Friday June 24, 6:00 am ET
Kristin Arnold

Your credit card company is making a killing off the money you spend on
your foreign vacation, and you might not even know it.

This extra profit is called a "foreign currency-conversion fee," and you
could be paying up to 4-percent extra when you make an overseas purchase
with a credit card.

One percent of that charge comes from the Visa or MasterCard networks,
which charge a 1-percent fee for converting your foreign-currency
purchase into American dollars.


On April 1, Visa replaced its 1 percent currency-conversion charge with
a 1 percent "transaction fee." MasterCard plans to start charging the
same transaction fee starting Oct. 1, replacing its current 1-percent
currency-conversion charge.

No matter what you call it, it's a good deal. Changing your money in
almost any other manner will probably cost you a lot more.
But many credit card issuers and banks are cashing in by adding a 2
percent to 3 percent charge on top of that 1 percent without doing a
thing to earn it.

"Banks have been making a profit off their customers for a long time,
while providing no service," says Linda Sherry, the editorial director
for Consumer Action in Washington. "Visa and MasterCard are doing all
the work; it's simply pure profit for banks."

Ed Perkins, syndicated travel columnist and author of "Business Travel
When It's Your Money," agrees.

"People who travel to foreign countries are outraged by this charge.
It's pure gouging that credit card companies know they can get away
with," he says.

Bankrate contacted four credit card issuers -- Bank of America, MBNA,
Citibank and Chase -- to get an explanation for the additional charge.
All refused to explain the reason for the charges.

Few banks actually list currency-conversion fees on credit card bills.
Most banks add the conversion fees into the transaction prices listed on
customer bills -- never actually showing customers the rates they charge.
The charge varies from card to card, but major credit card issuers such
as Citibank, Bank of America, JP Morgan Chase and MBNA charge 2 percent
on overseas purchases. Add that to the 1 percent Visa and MasterCard
charge for the actual conversion and you will pay an additional $3 for
every $100 you spend.

So that $300 pair of shoes you bought in Milan, Italy, will show up on
your statement as $309 because Visa or MasterCard got its 1 percent cut
charging you $3, while your credit card added its 2 percent by tacking
on $6.

That failure to disclose is starting to change due to recent lawsuits
brought by consumers who say that their credit card company failed to
adequately disclose currency-conversion fees on their credit card
statements. Some credit card companies have now issued statements
identifying the currency-conversion fee and how much their cardholders
will be charged.

"I think the breakout of the fee could have an impact on the market,"
Sherry says. "Consumer outcry could cause some banks to lower their fee
or do away with it."

But until that happens, shop around for a credit card like Capital One,
which doesn't charge a currency-conversion fee on top of the Visa or
MasterCard charge.

Perkins says that some credit cards are going a step further by charging
you a currency-conversion fee on items already listed in U.S. dollars.
"You can buy something from your home in the U.S. from a merchant
overseas, who has already converted your purchase into U.S. dollars, but
some credit card companies will still charge you a conversion fee. It's
just ridiculous."

More than meets the eye

Some overseas merchants now offer to convert your bill into your home
currency. This is called "dynamic currency conversion" and it means the
merchant -- and not your credit card issuer -- is converting the
currency.

If you think you are getting a deal because there will be no
currency-conversion charge, think again. The merchant is converting your
money for you, charging a percentage for the service, and passing along
that charge to you through his merchandise.

Perkins warns travelers to be very weary of dynamic-currency conversion.
"Right now, it's not a good deal," he says.

"Overseas merchants can gouge you by charging 5 percent or 6 percent to
convert your purchase into U.S. dollars. Add the 1-percent Visa and
MasterCard charge, plus what your credit issuer charges, and you are
taking two hits instead of just keeping your purchase in local currency
and taking one hit from your credit card."

Perkins says there have not been any set dynamic-currency-conversion
charges, so many merchants are taking advantage of gullible travelers.
"Visa and MasterCard are also doing their share of gouging by charging
you for something you already paid for, just because they can."
Better ways to pay?

So, what is the best course of action to avoid the charges?

Sherry recommends prepurchasing airline tickets, hotel rooms and rental
cars before leaving the United States to avoid the charge.

"I think a lot of consumers get hit hard when they dine out and shop.
That part is unavoidable, but most everything else can be purchased
before you travel overseas."

Also keep in mind that debit cards are just as handy as credit cards
when making purchases overseas, and some of the banks that charge
3-percent conversion fees do not charge for purchases made on a debit
card. According to Perkins, even some small banks and credit unions do
not charge for conversion fees.

Tips on getting the best deal

Here are some money-saving tips you can use for your overseas vacation.
Look for credit cards that do not have a currency-conversion fee.

Travel with stored-value cards issued by Visa, MasterCard and American
Express. These cards have upfront charges but will save you from being
charged the conversion fee on each purchase.

Using a bank or debit card is often the best way to go, because many do
not charge conversion fees.

travelers' checks are still popular, but you will be charged a fee
(usually around 7 percent) and will still pay on the conversion.
However, you can shop around to find a better exchange rate and a lower
fee.

Don't convert money from one currency to another more than once.
Also, don't exchange money at airports or hotels. They charge the most.

The bottom line

Most experts agree that despite the conversion fees, using plastic
abroad is still the cheapest way to make purchases, especially when you
consider hefty charges on travelers' checks and money exchanges.

"Exchange rates offered by credit cards are better because 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," says Jessica Iben of Chase Card Services. "Credit
cards also provide increased protection on any card purchase since card
members are never liable for unauthorized purchases."

Perkins agrees: "Credit cards may not be the best deal they used to be,
and we hate to be price-gouged, but paying with plastic is still the
smart way to travel overseas."

http://biz.yahoo.com/brn/050624/16435.html?.v=1

wrote:
I had this arguement with the customer service (if you can call it
that) rep from MBNA.

Paying bills for my mother included an MBNA credit card account. I
had so much trouble with the company that we got rid of that card.
That was quite a few years ago.

Maybe Bank of America's purchase of it will improve it; couldn't
possibly make it worse.
__________________________________________________ _________________
Un San Francisqueño en San Francisco.
http://geocities.com/dancefest/ - http://geocities.com/iconoc/
ICQ: http://wwp.mirabilis.com/19098103 --- IClast at SFbay Net

Icono Clast wrote:

wrote:

I had this arguement with the customer service (if you can call it
that) rep from MBNA.


Paying bills for my mother included an MBNA credit card account. I had
so much trouble with the company that we got rid of that card. That was
quite a few years ago.

Maybe Bank of America's purchase of it will improve it; couldn't
possibly make it worse.

Plain to see you've not done business with B of A lately!

__________________________________________________ _________________
Un San Francisqueño en San Francisco.
http://geocities.com/dancefest/ - http://geocities.com/iconoc/
ICQ: http://wwp.mirabilis.com/19098103 --- IClast at SFbay Net

In article 1120908937.f9eb421273746dcdd8006fec258db278@teran ews,
Icono Clast wrote:

wrote:
I had this arguement with the customer service (if you can call it
that) rep from MBNA.

Paying bills for my mother included an MBNA credit card account. I
had so much trouble with the company that we got rid of that card.
That was quite a few years ago.

Maybe Bank of America's purchase of it will improve it; couldn't
possibly make it worse.

I've usually used MBNA credit cards for overseas purchases as opposed to
those from Citibank or my SkyMiles Amex because of lower transaction
fees.

Actually, I thought it was a different exchange rate but Citibank and
Amex were just putting this surcharge on, which wasn't separated out in
the statement.

Some MBNA cards supposedly aren't imposing surcharges yet but they may
be later. Lot of discussions at flyertalk.com forums.

B of A makes their money, as do most of the larger banks, by imposing
fees whenever they can. So I doubt it will get better.

Best chances are with a credit-union issued card.

Hardly. The B of A employees I have encountered were morons, with
absolutely no common sense - totally messed up my credit card record -
almost screwed up my mortgage approval with another bank. Llater
screwed up a payoff on a car I was purchasing - all I wanted to do was
pay off the buyer's B of A loan. With money up front - no new loan.
Then our condo assn was doing business with them...when we took over
the books from the builder we changed banks. I had a friend who had
her mortgage autopaid each month, but would send an extra $150 on
principal - she got calls each month form the collection department
wondering why she "only" sent $150. Poor young things didn't
understand "extra principal payment." She ended up delivering the
extra $$ in person to the bank vp each month to insure proper
crediting until she was able to move her mortgage somewhere else. I
will never do business with them again.

On Sat, 09 Jul 2005 04:29:49 -0700, Icono Clast
wrote:
Paying bills for my mother included an MBNA credit card account. I
had so much trouble with the company that we got rid of that card.
That was quite a few years ago.

Maybe Bank of America's purchase of it will improve it; couldn't
possibly make it worse.
_________________________________________________ __________________
Un San Francisqueño en San Francisco.
http://geocities.com/dancefest/ - http://geocities.com/iconoc/
ICQ: http://wwp.mirabilis.com/19098103 --- IClast at SFbay Net

poldy wrote:

B of A makes their money, as do most of the larger banks, by imposing
fees whenever they can. So I doubt it will get better.

Charging for access to a teller was the one that really got
to me! (I've seen such absurdities mentioned in televsion
commercials for other banks, but it never ocurred to me any
real bank actually DID!)

Carole Allen wrote:

Hardly. The B of A employees I have encountered were morons, with
absolutely no common sense - totally messed up my credit card record -
almost screwed up my mortgage approval with another bank. Llater
screwed up a payoff on a car I was purchasing - all I wanted to do was
pay off the buyer's B of A loan. With money up front - no new loan.
Then our condo assn was doing business with them...when we took over
the books from the builder we changed banks. I had a friend who had
her mortgage autopaid each month, but would send an extra $150 on
principal - she got calls each month form the collection department
wondering why she "only" sent $150. Poor young things didn't
understand "extra principal payment." She ended up delivering the
extra $$ in person to the bank vp each month to insure proper
crediting until she was able to move her mortgage somewhere else. I
will never do business with them again.

I opened an account with B of A when I first came to
California, nearly fifty years ago (when they were as yet
only a California bank). In those days before compulsory
printed checks and magnetic coding, the supply of checks
provided by your bank only had the bank's name and ABA
number imprinted, no account number or account-holder
specified - if you wanted your name on them, you purchased
checks from a printer. (Banks were smaller, and everything
was done by live people instead of computers.) It was
possible, then, to use a "blank" check, in which you filled
in the name of your bank, along with the payee and your
signature, it then made its way via the payee's bank to
yours, where it was processed in the normal manner. (Common
practice, nothing in the least "odd" about it.) With B of
A, I availed myself of this option just once, only to get a
phone call a week or so later from the recipient informing
me that my check had been returned, and asking whether there
was money in the account "now" to cover it! ("Murphy's Law"
being in full operation, it was of course under particularly
embarrassing circumstances.) My bank statement arrived the
same day, showing that B of A had received the check and
"bounced" it for no appreciable reason, since there was, as
I knew, plenty of money to cover it. They also charged me
for the privilege of being embarrassed! I wrote a steaming
letter to the bank manager, who responded with profuse
apologies, assuring me the charge would be immediately
removed. When they finally did so, three months later
(after repeated phone calls from me), I promptly closed my
account, and have had no personal dealings with them since!
(Several of my clients, over the years, have had accounts
with B of A, and nothing I've seen of their experiences has
inclined me to rethink my own opinion of the bank.)

B of A makes their money, as do most of the larger banks, by
imposing fees whenever they can. So I doubt it will get better.
Charging for access to a teller was the one that really got
to me! (I've seen such absurdities mentioned in televsion
commercials for other banks, but it never ocurred to me any
real bank actually DID!)

Abbey does that in the UK, if the access is to make a withdrawal.

Abbey are ****e.

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