you being overcharged for overseas purchases?|
Kristin Arnold Bankrate.com||
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 3-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.
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 up to a 2-percent charge on top
of that 1 percent without doing a thing to earn it.
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.
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.
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
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.
$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.
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 the best
credit card and ask questions until you're sure your selection
doesn't charge a currency-conversion fee on top of the Visa or MasterCard
Consider, for example, Capital One. Not only
does the credit card firm not change an additional 2-percent fee, it even absorbs
the 1 percent charge from Visa or Mastercard, so the customer pays nothing.