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.
