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Credit card foreign transaction fees mostly up

Seeking big spenders, a few card issuers buck the trend and drop the fee

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See newer story: More issuers offer credit cards with no foreign transaction fee

If you're planning a foreign trip, double-check with your credit card issuers to find out how much using your credit and debit cards will cost you: Many have increased their foreign transaction fees, though some, in a move to attract rewards-hungry consumers, have recently decided to buck the trend and drop the fees. (See charts below) Tracking credit card foreign transactions fees

If you've used your credit card overseas before, you're probably aware that the convenience generally comes at a cost as card issuers tack on a foreign transaction fee (once called a currency conversion fee). The amount of this charge varies from card issuer to card issuer, as do the guidelines for determining when this fee will be added on. According to a July 2010 study by Pew Trusts, more than 90 percent of bank cards and almost 60 percent of credit union cards tack on a foreign transaction fee.

"Most people have three or four cards, and every card has a different foreign exchange fee," says Charles Leocha, publisher of Tripso, a travel news and commentary website.

In late 2010 and early 2011, the differences increased, as some card issuers bucked the trend of recent years and dropped the fee, especially on upscale or travel-related cards.

Foreign transaction fees dropped by ...
American Express charges a 2.7 percent foreign transaction fee for most of its cards, but in December 2010, the card issuer announced that it was eliminating foreign transaction fees for users of its Platinum Cards and Centurion Cards. The move was expected to solidify American Express' relationship with current cardholders and attract new ones. "Our aim is to strengthen relationships with card members who rely on American Express because they appreciate the value of world-class service and the benefits of our premium products," said Ed Gilligan, vice chairman of American Express, in a Dec. 17, 2010, statement.The move became effective near the end of March 2011.

Chase has been moving to waive foreign transaction fees on some of its travel-oriented and upscale cards. "Effective immediately, Chase is eliminating foreign transaction fees on the Marriott Rewards Premier Credit Card resulting in 3 percent savings for card members when making purchases abroad," said Chase spokeswoman Laura Rossi in a March 31, 2011, release. That brings to seven the number of Chase cards that have eliminated foreign transaction fees. The others: Chase Sapphire Preferred, Continental Airlines Presidential Plus Card, British Airways Visa Signature Card, Chase Priority Club Select Visa Card, Hyatt Gold Passport Card and United Mileage Plus Club Visa Card.

Citi also got into the act, eliminating foreign transaction fees from its ThankYou Premier Card and its ThankYou Prestige Card. Finally, Pentagon Federal Credit Union announced in October 2011 that it was dropping foreign transaction fees from all its cards.

Breaking down the fees
But the norm remains the same for most standard cards. Visa and MasterCard, which handle the transactions between the merchant and the bank that issued your card, each charge a 1 percent foreign transaction fee. However, most card issuers that use the Visa and MasterCard payment system add their own fees on top of that. If you have a Bank of America MasterCard, for example, you'll pay the 1 percent MasterCard charges plus an additional 2 percent levied by Bank of America, for a total of 3 percent.

Discover and American Express don't utilize the Visa or MasterCard payment system, but they, too, add their own fees for foreign transactions.

Discover charges cardholders 2 percent. If you have a Discover card, it's also important to note that it's not accepted in many countries, so the foreign transaction fee issue may be moot.

The percentage charged by card issuers varies, but can you avoid the fees completely? You can if you have a Capital One card. The issuer waives the foreign transaction fee completely, which can save cardholders a lot of money if they travel frequently, says Linda Sherry, director of national priorities for San Francisco-based advocacy firm Consumer Action.

It is a hidden fee in every sense of the word.

-- Charles Leocha
Tripso publisher

Cardholders also face a costly change in the definition of the word "foreign." It used to be you were charged a "foreign" fee only when you made a purchase while standing on foreign soil. Now, Visa and MasterCard have both redefined foreign transactions as any purchase that at any point touches a foreign bank. So, for example, you can be sitting at your computer in Elkhorn City, Ky., buying a Givenchy frock online directly from the French fashion designer. If Givenchy uses a French bank to process transactions, Visa and MasterCard charge your card-issuing bank an additional fee. Most large card issuers pass those fees on to their customers.

If your card issuer has been taken over by a bigger bank, the change in ownership also may have cost you. Before they were swallowed by bigger banks in 2008, Washington Mutual and Wachovia charged cardholders only the 1 percent MasterCard/Visa fee for foreign transactions. Today, Washington Mutual is owned by Chase and Wachovia by Wells Fargo. Chase and Wells Fargo also pass on to their cardholders the 1 percent MasterCard/Visa foreign transaction fee and both tack on an extra 2 percent fee of their own.

The cash factor
Not only do you have to pay to use credit, but many banks charge for using debit cards to make purchases and for accessing cash at foreign ATMs. Make sure you find out the cost of each scenario, so you can determine whether it makes more sense to use your debit card to make a direct purchase or to use it to make a withdrawal from an ATM and pay with cash instead. For example, Citi charges a 3 percent foreign transaction fee for purchases made with a debit card, while if you are a Citibank user withdrawing funds overseas from a non-Citibank ATM, you'll pay that 3 percent foreign transaction fee along with $1.50 per withdrawal.

Consumer advocates had voiced concerns that the cost of using plastic overseas would go up, as a result of the Credit Card Act of 2009. However, as of February 2010, none of the issuers surveyed by CreditCards.com had increased their foreign transaction fees for credit card purchases, with the exception of Barclaycard/Juniper, whose fees went up from 2 percent on some cards to 3 percent. Some banks had raised the charge for foreign ATM usage. For example, Bank of America added a 1 percent currency conversion fee for using a Global ATM Alliance ATM, an action that used to be free.

Most people have three or four cards and every card has a different foreign exchange fee.

-- Charles Leocha   
Tripso publisher   
Others complain that card issuers and banks often don't make this information readily available. In some cases, the foreign transaction fee is not easily found on a card issuer's website or on credit card statements, meaning cardholders must call the issuer to even find out what the fee is. "It is a hidden fee in every sense of the word," says Leocha.

While some argue that the card issuers and banks are being greedy in charging these fees, others point out that the banks are providing consumers with the convenience of being able to make international purchases easily, and convenience is worth a price. In addition, "there's a cost associated with converting currency or doing transactions between two banks that deal with different currencies," says Consumer Action's Sherry. "Banks have that same cost whether the person is overseas presenting the card or the person is buying something over the Internet from a foreign-based company and foreign bank."

The only thing cardholders can really do is find out the fees in advance so they can determine the best cards to use and budget appropriately. Doing otherwise "can get pretty expensive," Leocha adds.

Credit card foreign transaction fees (chart updated 12/29/2010)
Issuer Issuer fee
MasterCard/Visa fee
Total fee
American Express 2.7%; no transaction fees for Platinum Cards and Centurion Cards n/a
2.7%; no transaction fees for Platinum Cards and Centurion Cards
Bank of America 2%
1%
3%
Barclaycard/Juniper 2%
1% 3%
Capital One none
none
none
Citi 2%; no transaction fees for ThankYou Premier Card and ThankYou Prestige Card
1%; none for ThankYou Premier Card and ThankYou Prestige Card
3%; none for ThankYou Premier Card and ThankYou Prestige Card
Discover 2%
n/a
2%
HSBC*
2%
1%
3%
Chase 2%; no transaction fees for British Airways Visa Signature or Sapphire Preferred cards
1%; no transaction fees for British Airways Visa Signature or Sapphire Preferred cards 3%; no transaction fees for British Airways Visa Signature  or Sapphire Preferred cards
US Bancorp 2% 1% 3%
USAA (available only to members of the military and their immediate families) none 1%
1%
Wells Fargo 2% 1%
3%
Foreign ATM transaction fees
Issuer Foreign ATM cost
Bank of America 1 percent currency conversion fee at Global ATM Alliance ATMs/$5 plus 1 percent currency conversion fee at Non-Global ATM Alliance ATMs
Citi Citibank ATMs: $0 plus a 3 percent currency conversion fee/nonCitibank ATMs: $1.50 plus a 3 percent currency conversion fee
HSBC $1.50 for each ATM withdrawal; no fee for Premier Debit MasterCard
Chase $3 plus 3 percent currency conversion fee; for premium accounts, $0 plus 3 percent currency conversion fee
USAA $0 plus 1 percent currency conversion fee
Wells Fargo $5 withdrawal fee

*HSBC's Premier World MasterCard has no foreign transaction fee.

See related: Even card purchases at home trigger foreign fee, 10 tips for taking a credit card on a foreign vacation, Top credit card issuers' foreign transaction fees

Updated: October 4, 2011


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