Visa MasterCard Discovery

Foreign transaction fees levied by top credit cards

[Friday, October 15th, 2010]

When you are in a foreign country, you can still use your American credit card for most of the purchases you make or other services. However there is bad news as well. Each of these purchases usually comes associated with a fee called foreign transaction fee or what in other words is known as a currency conversion fee. It is advisable to find out what this currency conversion fee on your card is before you set to sail abroad. However, this thing is not as easy as it seems. In 2006, MasterCard, Visa and Diners` Club were slapped with a whopping 336 million dollar settlement for apparently hiding the foreign transaction fee. This is because customers for a long time weren`t informed about this fees and the court thought that they were entitled to get a refund from the credit card issuer.

After this particular settlement, the credit card issuers chose to declare the currency conversion fees in the terms and conditions of their credit cards. To track these charges down, customers might need to call customer service and even then one might not be assured that there would be answer provided. The tricky part is that MasterCard and Visa are corporations which are involved in process payments for the transactions between customers and merchants. The cards that use these networks are issued by companies and banks like Chase. Companies like American Express and Discover have their own payment processing network. Visa and MasterCard have a charge of 1% of the purchase value as currency conversion fees. Other banks have an additional 1 or 2 % which could take the total fee of the credit card customer to around 3%. Therefore the charge on your for spending on your credit card abroad is getting complicated with charges from your credit card issuer as well as the payment processing network.

Another development in this regard makes this process even more complicated than what it is. American Express` currency conversion charge has always been 2% and it has never issued any credit cards through other banks. However, Bank of America and Citi have started issuing American Express Cards offlate, along with MasterCard and Visa. The foreign transaction charges in that case remain at 2% when the cards are of American Express, and the bank itself doesn`t charge anything extra. Capital One is the only credit card issuer that doesn`t charge a massive foreign transaction fee and absorbs even the charges of MasterCard and Visa.

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