Who collects from $800 million credit card ruling?

A California judge has ordered Visa and MasterCard to refund $800 million in fees charged to customers on overseas credit card purchases.

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Here's what you need to know about the lawsuit and the hidden, overseas card fees that most folks don't know about.

What is a foreign currency conversion charge?
When you make an overseas purchase with a credit card, the merchant is paid in local currency. But the charge that shows up on your card bill is in U.S. dollars. Visa or MasterCard converts the cost of your overseas purchase from the local currency to U.S. dollars and charges your bank a 1-percent currency-exchange fee for the service.

Banks pass this 1-percent fee on to customers and some major banks charge additional 2-percent fees of their own. So whether you know it or not, you pay a 1- to 3-percent fee on every overseas credit card purchase that you make.

Tracking down foreign currency conversion fees is tough. Looking at your credit card bill after an overseas holiday won't be much help. Few banks list currency conversion fees on card bills. Most banks bundle conversion fees into the transaction prices listed on customer bills.

To learn about your bank's policy on currency conversion fees, you'll have to dig out your cardholder agreement. Many travelers are unaware that foreign currency conversion fees even exist.

Why are Visa and MasterCard being sued?
The California lawsuit claims that Visa and MasterCard are hiding currency-conversion fees from customers. The suit also claims the 1-percent fees charged by Visa and MasterCard are too high.

What does the ruling mean to me?
Both Visa and MasterCard are card associations owned by banks from all over the country.

On April 8, Alameda County Superior Court Judge Ronald Sabraw ruled that Visa and MasterCard concealed the 1-percent fee from customers and should pay refunds. He ordered Visa and MasterCard to refund customers who have paid foreign currency conversion charges since 1996. The refund is estimated at $800 million.

Visa will pay most of the refund to its customers. The reason? Visa is based in California and the ruling applies to Visa customers nationwide.

Under the ruling, New York-based MasterCard need only refund customers that live in California. But MasterCard could face similar suits in other states.

The California judge also ordered Visa and MasterCard to better disclose foreign currency conversion fees in the future. The judge did not find the 1-percent fees to be excessive or illegal.

Visa and MasterCard have vowed to appeal the ruling.

I've paid 1-percent conversion charges on overseas purchases. When do I get my money back?
A May 23 court hearing has been scheduled to discuss how customer rebates will be made. Refunds could be credited to customer credit card accounts or granted with checks or vouchers.