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.

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.

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

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

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.

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.

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/

(Miguel Cruz) wrote:

Looks like I'll need a new credit card. Anyone know any that still charge
the flat 1% like MBNA has done until now?

USAA Bank cards have no super-surcharge for foreign purchases.

"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

In article .com,
wrote:
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.

$5 per foreign ATM withdrawl? That's quite high, even by greedy
American bank standards.

--
------------------------------------------------------------------------
Timothy J. Lee
Unsolicited bulk or commercial email is not welcome.
No warranty of any kind is provided with this message.