| Are
you being overcharged for overseas purchases? | | |
| 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 wary 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 2-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." | 
