Foreign Transaction Fees Interview with KGO Radio San Francisco
CreditCards.com Senior Industry Analyst Matt Schulz spoke on Sunday, April 12, 2015, with John Hamilton of KGO Radio San Francisco about the results of the April 2015 Foreign Transaction Fees survey. The interview and transcript are below.
John Hamilton: Matt Schulz with CreditCards.com says he knows which travel cards are the best for our needs. And to enable smart selection and use of the cards by offering news, advice, features, and tools. Matt Schulz is spokesman for CreditCards.com. Matt Schulz, tell us about CreditCards.com, and how you make money?
Matt Schulz: Well, we get a fee from the credit card issuers basically when somebody applies successfully for a card through our website. So that’s basically our business model and we have lots of card available out there. But we also have an independent editorial team whose job is to kind of help people make smart decisions about acquiring and using credit.
Hamilton: All right, but you could be biased, I mean, maybe there’s a better — you’ll recommend a credit card, which we’ll be asking you about in a minute — but you’re not going to mention any that you’re not affiliated with, right?
Schulz: No, I actually do that all the time –
Hamilton: Oh, you do?
Schulz: the card that I recognize most is not on our website currently.
Hamilton: All right, so you’re unbiased then. All right, well — we’ll take your word on that. Now I’ve been doing this show for nearly three decades and I’ve taken on the credit card companies over and over and over that have been ripping off the public by charging what they call “foreign transaction fees.” Explain that fee.
Schulz: Well, basically a foreign transaction fee is a charge that you face if you, for example, buy something while you’re traveling overseas or even if you buy something through a foreign bank if you’re here in the states. And it’s generally about 2 or 3% on top of that transaction. But the good news is, is that we’re seeing more and more cards that don’t feature this cost anymore.
Hamilton: Yeah because Visa and Mastercard – I’m not sure about Discover – but they charge 1%. Well, I can see that because they actually have to make the transaction different. They have to do some work. But banks never – they don’t do anything. They just tack on this 2 and 3%, which seems to me to just be ridiculous.
Schulz: Well, there is a little bit of a profit thing going on there, but the banks that don’t charge the foreign transaction fee on these cards — among them Capital One, Discover, Pentagon Federal Credit Union, HSBC — basically what they’re doing is eating that 1% that they pay to Visa and Mastercard for that foreign currency transaction in order to make it to where the cardholder doesn’t pay anything.
Hamilton: Now for those of us who travel out of the country, which credit cards are still charging the fee or is it better to name the cards that don’t charge the fee? What’s the most?
Schulz: Well, like I said, the ones that aren’t charging the fees are Capital One — which has famously kind of made that well known. And other ones are Pentagon Federal Credit Union, HSBC, and Discover. And among the other eight top issuers – Citibank, Bank of America, folks like that — what we saw is that about one-third of the cards out there don’t have a foreign transaction fee. So what that means is if you go looking and you really don’t want to pay one of these fees, which you shouldn’t want to pay, you can find cards that don’t charge them.
Hamilton: I have Chase. I have a British Air Chase and a United Chase. Now the reason I have them is because I got 100,00 miles by opening them up. They had this tremendous promotion that didn’t last very long, but obviously 100,000 miles will take you a long way. I don’t think I pay a fee on either of those cards. So some of these — is that correct, first of all?
Schulz: I don’t know specifically about those cards, but it wouldn’t surprise me. I know that there are several Chase cards, for example, like the Chase Sapphire Preferred doesn’t charge foreign transaction fees. So I think you’re probably right.
Hamilton: These don’t either because I checked on them and I just wanted to make doubly sure by asking you. So a Bank of America or Chase — obviously it’s possible that some of the cards charge, some don’t?
Schulz: Yeah, it definitely can vary within even a bank so it’s important to do your homework and make sure that you look for all the fees that come with a card before you apply for it.
Hamilton: Which of the no-fee cards do you recommend are the best? Maybe there’s one specific one that is the best or maybe several.
Schulz: Sure, the one that I like the best is the Barclaycard Arrival Plus World Elite Mastercard, and this is one that has no foreign transaction fees and you get 40,000 bonus miles when you spend $3000 in the first ninety days. And basically that 40,000 miles can translate into $400 in a statement credit towards a travel purchase. And one of the other cool things about this card is that it is a chip and pin card. So if you go to London and you want to buy a ticket at the automated kiosk and not have to wait for a teller, you’ll be able to use this card because it’s got that smart chip and it’s got a pin associated with it. So you won’t need to deal with somebody.
Hamilton: Yeah, the smart chip, for instance on the British Air Chase – I’ve got a chip. On the United Air mileage, I don’t have a chip. My understanding is all the credit cards are coming with the chip because now you need them in Canada, too.
Schulz: Yeah, it won’t be too long before virtually every card has them. And if you have a card now and you haven’t gotten a replacement one sent to you, I would expect to get one, if not by the end of the year, then certainly not too far after that.
Hamilton: So there’s no point in phoning the credit card company, they’re going to do it at their time?
Schulz: Well no, it certainly can’t hurt to make a phone call and ask because banks, if they get a bunch of phone calls, they might see the need to accelerate things potentially.
Hamilton: Ok so there’s going to be a change. So eventually we’re going to have a chip down here in order to do a transaction anywhere. The chips are coming to the U.S. to protect us, I guess, huh?
Schulz: It’s moving really slowly just because there’s a whole lot of money involved on both sides, but it’s eventually going to come. And it’s a good thing because it is significantly safer than the old magnetic stripe card. Although, it will take a little bit of getting used to for folks because we’ve been using cards the same way for forever.
Hamilton: Apple Pay – that’s coming in and I guess that’s going to be, we’re going to be using our phones. Our iPhones and I guess all of the phones will all of a sudden start doing that. Is that a reality that’s going to happen?
Schulz: I think that mobile payments have been coming for a long time and Apple Pay with all the hype kind of surrounding them, I think was kind of the final straw that’s going to kind of launch this. Because it’s going to end up being kind of the rising tide that lifts all boats because Google had Google Wallet, but that never really took off. But when all these retailers are getting ready to accept Apple Pay, it’ll also allow them to accept Google Wallet and some others. So that’ll end up kind of helping push this forward.
Hamilton: Isn’t it amazing how Apple just — somebody has already tried it then Apple comes in and creates a market?
Schulz: There’s nothing quite like Apple.
Hamilton: It’s amazing. A lot of credit cards will send out if you think my credit card, and you’ve mentioned it already – forty thousand for that one and it’ll be thirty thousand from another – but whatever, I love that 100,000 and I don’t think that’s going to come back. How much – when they say you can buy more mileage – so let’s say British Air sends a note to me and they say, “Go on the website and you can buy more mileage” – what’s that actually costing us?
Schulz: Well, it varies by the airline. It’s kind of hard to put a number on that, but generally that’s not the cheapest way to acquire miles, that’s for sure.
Hamilton: Yeah it doesn’t seem to be. Is there a cheaper way to get miles on say, whatever airline you fly on a lot, or just generally?
Schulz: Well, one thing — and we’ve talked about it already — these sign-up bonuses can really help get you miles really quickly. But something else you can do is if you shop through some of these airlines and some of these credit card issuers shopping portals and say you’re going to buy something from Macy’s, for example, you’re going to do it anyway, you can look in one of these portals and see if maybe they have a special with them where you’ll get three points per dollar instead of just one. So just taking a couple of extra steps like that can help kind of build points as well.
Hamilton: I’ve noticed that with United, United has a whole area you go into and you can buy flowers for Mother’s Day. Those are maybe 3, 4, 5 miles per on up depending on if you come early, it’s amazing. Because there are so many things, and I keep seeing Macy’s pop up, and nothing from Tiffany’s or Neiman Marcus, however.
Schulz: Maybe that’s kind of them.
Hamilton: Maybe they don’t need it.
Schulz: That’s entirely possible.
Hamilton: So again give us that top one that you feel everybody should have and by the way – Barclays, that’s good for any airline? Or virtually all airlines-
Hamilton: And other things, too? What was that one again?
Schulz: It’s a little bit of a mouthful. It’s called the Barclaycard Arrival Plus World Elite Mastercard. And it has no foreign transaction fees. It comes with chip-and-PIN. It’s another one where they give you your free FICO score and another neat thing that this has is that say you’re redeeming 40,000 miles for a travel purchase, when you do that they’ll give you 10% miles back. So you redeem 40,000, they’ll give you 4,000 back. So you’re saving a little bit there so it’s a good deal. The one thing to know is that is has an $89 annual fee that is waived in the first year, but as far as annual fees go, that’s par for the course and when you have it waived for the first year it at least gives you a little a bit of a head start.
Hamilton: I know Chase is $95. Which brings up — oh, I gotta go, unfortunately. We gotta do this again. You’re just loaded with great information for listeners because you know, we’re all using credit cards and boy, you can get ripped off by them as we talked about mileage-wise. Now to reach Matt’s organization go to CreditCards.com. That’s CreditCards.com. Matt, thanks for joining us on the go.
Schulz: Sure, anytime.
Hamilton: Matt Schulz.