Your Travel Rights: Credit Card Fee Surprises
by John Hawks

article continued from

ANSWER: Unfortunately, the answer is “Yes” in almost every case. In an effort to grow their fee income, many large U.S. credit card issuers and banks began expanding their service charges (starting in 2005) for international purchases. Some of these fees are described as international service charges that apply to any purchases outside the United States (even purchases denominated in U.S. dollars already that don’t require any currency exchange!). Other charges are billed as the credit card company’s fees for converting the purchase amounts into U.S. dollars.

What does this mean in practical terms? If you buy a $500 piece of jewelry in a European city, and the merchant converts the price into U.S. dollars before running your credit card, and your card issuer charges international service fees, then you could end up paying the original $500 value plus an extra $10-$15 for the currency conversion and another $5-$15 for the privilege of using your credit card overseas!

Remember these tips to protect yourself against credit card fee surprises when you travel abroad:

1. Ask your credit card issuer/bank for a written explanation of its fees on international purchases. While many community banks (and almost all credit unions) have refused to tack on these fees, major card issuers like Bank of America and Citigroup have set their international service charges or currency conversion fees at a whopping 3 percent! Don’t rely solely on what your bank has done in the past, as many large U.S. banks have changed their fee structures for international credit card transactions within the past two years.

2. Find credit card offers with low international fees, and consider getting a new card just for international travel. If you take several overseas trips a year, you might benefit by applying for a card with low international service charges/currency conversion fees that you use solely for travel abroad. For example, Capital One currently charges a relatively low 1 percent fee -- and many locally owned banks and nonprofit credit unions issue cards with no international fees at all.

3. Avoid “dynamic currency conversion.” Sounds like a convenience when hotels, car rental firms, and other suppliers convert overseas prices into U.S. dollars, right? Actually, it can be a very expensive step, since these companies (and/or your credit card issuer) can tack on an extra couple of percentage points in fees for automatically making these conversions. Avoid the practice if possible, and remember that you do have the right to decline the conversion into dollars. (Practice converting local currency amounts into U.S. dollars in your head, or carry a small calculator with you.)

The bottom line? Credit cards still make a lot of sense overseas, since (even with these new fees) you’ll still likely pay less than if you convert U.S. cash into local currency at not-so-favorable exchange rates. However, you should know the facts about what you’re being charged in the end to use your cards in other countries, and follow the advice above to reduce any hidden costs.

(Photo credits: American Express; BusinessWire)