It's summer. And for some lucky Americans, this means going
vacation to a far off land in hopes of relieving the stress
of everyday life. In general, it is a very happy couple of
months for the regular American family but it can also be
an even happier time for credit card companies. This is because
of the fact that credit card companies are making a killing
off the money Americans spend on their foreign vacations through
questionable fees.
Imagine this situation. You and your family are in Paris,
France on vacation. Your wife sees a lovely pair of shoes
that she "must have" and so being the good husband
that you are, you purchase the $300 pair of shoes using your
credit card. Two weeks or so later, your credit card statement
shows up and instead of you seeing a charge for $300 dollars,
you statement shows a charge for $309. How did this happen?
The answer is that you were charge 1% foreign currency-conversion
fee by Visa or Master to convert your foreign-currency purchase
into American dollars and were also charged an addition 2%
foreign transaction fee by your credit card issuer.
If you are form the U.S., when you make a purchase abroad
with your credit card, your credit card issuer will convert
the charge to U.S. dollars before it appears on your statement.
Usually, this is done through the Visa or MasterCard networks,
which charge a 1-percent foreign currency-conversion fee for
converting your foreign-currency purchase into American dollars.
According to Kristin Arnold, a writer for Bankrate.com, this
is a good deal since changing your money in almost any other
manner will probably cost you a lot more. What is unsettling,
however, is the additional foreign transaction fee which your
credit card issuer charges. This fee can range from 2-3%.
According to Linda Sherry, the editorial director for Consumer
Action in Washington, "Banks have been making a profit
off their customers for a long time, while providing no service."
In Agreement, Ed Perkins, a syndicated travel columnist and
author of "Business Travel When It's Your Money,"
says that these fees are "pure gouging that credit card
companies know they can get away with". Foreign transaction
fees do not relate to any service that the credit card issuer
provides but instead is buried deep in the fine print of the
credit card agreement between the issuer and the customer.
So in retrospect, while Visa or MasterCard may have done you
a favor by converting your foreign-currency purchase into
American dollars for a fee of 1%, your bank's additional charges
were driven by pure greed.
So what can you do to avoid these fees? The answer is to do
your research. Currently there is no standard rate at which
all banks and corporations charge, so you could possibly find
a card that does not add on any additional fees for overseas
purchases. For example Bank of America, Citibank, MBNA and
JP Morgan Chase all charge 2 percent on overseas purchases
while Household Credit Services, Providian Financial Corp
and Capital One do not.
Another way that one can protect themselves from being overcharged
is to know and keep up with the latest currency exchange rates.
Visiting currency conversion sites like http://www.gocurrency.com
is a great way to do this. Having a general idea of the exchange
rate will help you make more informed decisions when you purchase
goods and services from local vendors.
In the end, credit card companies are in the business to
make money, however, it is up to you whether they get it from
you honestly or through underhanded practices.
Gerron Woodruffe is a contributing writer for GoCurrency.com
http://www.gocurrency.com.
GoCurrency provides information on global exchange rates,
movements and news related information.
