Top credit card issuers' foreign transaction feesCurrency conversion fees and rules vary among credit card issuersBy Emily Starbuck Gerson
Editor's note: See newer version of this story
When visiting a foreign country, you can conveniently use your American credit card for most goods and services. The part that's not so convenient? Each purchase usually comes saddled with a foreign transaction fee, or what used to be called a currency conversion fee.  It's wise to find out what the fee for your card is before you leave the country so you can budget your spending abroad. Unfortunately, that's easier said than done.
In 2006, Visa, MasterCard and Diners Club were slapped with a $336 million settlement for hiding foreign transaction fees. Customers who used those cards abroad between 1996 and 2006 were not notified they were being charged such fees, and a court declared the consumers were entitled to refunds.
After the settlement, some issuers chose to reveal the foreign transaction fees in their cards' terms and conditions. For others, they remain absent. Tracking them down often requires a call to customer service or the corporate office, and even then, you're not guaranteed an answer.
Here's where things get trickier. Visa and MasterCard are similar corporations that each process payments between a merchant bank and a cardholder's bank. Cards that use the Visa or MasterCard payment system are issued by banks, such as Chase or Capital One. American Express and Discover have their own payment processing systems, so they do not need to be associated with other banks.
Visa and MasterCard each charge 1 percent of purchases as a foreign transaction fee. Most banks add an additional 1 percent or 2 percent, leaving your total fee at 2 percent or 3 percent. For example, Bank of America charges a 2 percent foreign transaction fee, and Visa and MasterCard charge 1 percent. Therefore, if you use your Bank of America-issued Visa abroad, you would be charged a total fee of 3 percent of your purchases (comprised of a 2 percent Bank of America fee and a 1 percent Visa fee).
A new development makes this even more complicated, however. American Express' foreign transaction fee has always been 2 percent, and it has never issued any cards through banks besides itself. But Citi and Bank of America just began issuing American Express cards in addition to Visas and MasterCards. So is the foreign transaction fee 4 percent? Thankfully, no. Betty Riess, spokeswoman for Bank of America, says the foreign transaction fee remains at 2 percent for Bank of America-issued American Express cards, and the bank does not add on any additional fees. Citi's public affairs department declines to say whether Citi-issued American Express cards' fees work the same way.
Capital One is the only giant issuer without a foreign transaction fee. The 1 percent MasterCard and Visa fee is still processed, but Capital One absorbs the fee instead of passing it on to consumers. Discover also has no fee, though it is accepted in very few countries due to a smaller payment network. This may change due to Discover's recent acquisition of Diners Club International. Washington Mutual is also favorable -- it does pass along the 1 percent Visa or MasterCard fee along to cardholders, but it does not charge an additional bank fee.
Fees, as always, are subject to change. To report an update, write Editors@CreditCards.com.
* Citi declined to reveal its breakdown of fees for its AmEx card
Updated: November 21, 2008
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