nickled and dimed by the man
Today I am going to spout off about foreign currency transaction surcharges imposed by credit card issuers, because this practice PISSES ME OFF.
First let me explain how things used to be.
When you used your Visa or Mastercard overseas for a purchase in a foreign currency, Visa and Mastercard converted the amount to your own currency in order to bill you, and gave you a favorable exchange rate. They also charged you a small fee, amounting to 1% of the purchase amount, for providing this service. That was reasonable, and it still got you nearly the best exchange rate possible.
What credit card issuers are doing now:
At some point, at least six years ago, the credit card companies began tacking on their own foreign currency transactions surcharges, on top of the 1% levied by Visa and Mastercard. The credit card issuers do not provide any services to justify the additional 1% to 3% surcharge (varies by card issuer). The currency exchange is handled by Mastercard/Visa. Mastercard and Visa provide toll free phone numbers in foreign countries in case you have a problem with your card, whereas most card issuers do not.
Why credit card issuers levy these additional fees:
Because they get away with it and many people don't even notice. The surcharges are inconspicuously added to every foreign currency transaction because on your credit card statement you see only the charge in the orignal currency and then the actual amount you were charged in U.S. dollars. The exchange rate for each purchase is not given and the surcharges are simply padded onto the U.S. dollar purchase amount and never mentioned
I've called numerous credit card issuers about this. Some representatives didn't know what a foreign currency transaction surcharge is or didn't know their company levied a surcharge, but most simply could not explain why they impose the surcharge. One card issuer claimed it was to offset the cost of increased fraud from overseas transactions.
Why these surcharges piss me off so much:
We went to Europe for a month in August 2001 and I took with me a Citibank World Mastercard. I have no idea what the "World" part meant, but that was part of the name of the card, and it even had an additonal logo and graphics on the card indicating it was a "World Mastercard". It seemed like just the credit card to take on a trip abroad, but that couldn't have been further from the truth. It was a great trip, and we had no problems with the credit card (that I knew of), but upon our return and my review of our credit card statement, I found that the exchange rates we got by using our credit card seemed really... average. In terms of exchange rates, we did almost as well exchanging money on the street at change booths as we did using the World Mastercard, which should not have been the case. After some search and some phone calls to Citibank I was educated about "foreign currency transaction surcharges" and more importantly I discovered that Citibank was one of the worst offenders; tacking on 2% over the Mastercard 1% fee, for a total of 3% on every transaction. So the exchange rate advantage of using a credit card was negated by these bullshit surcharges. Or another way of looking at it, Citibank milked us for almost $200 in transaction fees that month. I ended up closing my Citibank account over this issue after they refused to refund any of the surcharges. That didn't really give me any satisfaction, however. Credit card issuers continue this deceptive practice today, and it seems that still few people have any idea they are being had. That is why I am telling this story, in an effort to let one or two more people know about this shit.
What you can do:
Fortunately not all credit card issuers impose foreign currency transaction surcharges. Before you travel abroad, ensure that your credit card issuer does not impose these fees. Switch to a card issuer that does not impose the additional surcharges or open a new credit card to use when travelling. Even if your current card issuer did not impose surcharges when you opened the account, check with them again approximately one month before your trip. I recently cancelled my "travelling" card because that card issuer suddenly began imposing foreign currency transaction surcharges of 2%.
Friendly card issuers with respect to foreign currency transaction fees:
*Capitol One (I've read they go even further by eliminating the 1% surcharge imposed by MC/Visa. In effect a -1% card issuer surcharge, for a 0% surcharge overall)
There are other friendly card issuers, especially smaller banks and credit unions. Shop around and ask questions about foreign currency transaction surcharges. Get the card issuer's policy in writing.
Card issuers who SCREW their 'customers' on foreign currency transaction fees:
(surcharge listed is TOTAL surcharge including MC/Visa 1%)
Citibank 3%
National City 3%
MBNA/Bank of America 3%
Chase/Bank One/First USA 3%
Providian 3%
American Express 2% (not MC/Visa obviously, but has 2% total surcharge)
... and MANY others.
