The Credit Card Travel Skewer
David Lazarus
Wednesday, March 9, 2005
Use your credit card while traveling abroad and you'll be hit with a "foreign currency conversion fee." In the past, that roughly 3 percent charge wasn't always spelled out in monthly bills and likely slipped past the notice of many cardholders.
Beginning in April, the fee will be made clearer by banks in response to Visa and MasterCard changing how the conversion system works.
But don't expect a detailed explanation -- or any explanation -- as to why banks add their own fee on top of what the credit card companies are charging.
"Visa and MasterCard are doing all the work," said Linda Sherry, a spokeswoman for Consumer Action in Washington. "The banks aren't doing anything. For them, it's pure profit."
For years, Visa and MasterCard have levied a 1 percent fee for credit card purchases abroad. Buy a $100 sweater in Paris, say, and the companies would charge $1 to convert the transaction for billing purposes from euros to greenbacks.
"We manage hundreds of currencies," explained Sharon Gamsin, a MasterCard vice president. "There are costs to it."
Fair enough. But how do banks issuing MasterCards (or Visa cards, for that matter) justify tacking on another $2 to that $100 sweater purchase, as is typically the case, in the form of an extra 2 percent charge?
"That's something the banks choose to do," Gamsin replied. "We won't comment on it."
Similarly, Rhonda Bentz, a Visa USA vice president, insisted that any charges levied by the banks are the banks' business alone. "I couldn't begin to tell you what the money goes for," she said.
Betty Riess, a spokeswoman for
Bank of America, acknowledged that a 2 percent bank fee is added to the 1 percent charged by credit card companies for overseas transactions. But she declined to say why.
"We don't get into specific components of pricing," Riess said. "That would be proprietary."
Citibank also charges an additional 2 percent for using your plastic abroad. But Janis Tarter, a spokeswoman for the bank, was unable to say what exactly that fee covers.
As for
Wells Fargo, it too cuts itself in for 2 percent of the action when cardholders roam the world. But the bank is as reticent as its peers when it comes to what customers get in return.
"As a normal course of business, Wells Fargo evaluates its pricing and rate structures from time to time," a spokeswoman offered by e-mail. "Market conditions and changes in the cost of doing business have a bearing on when we adjust our prices and rates."
Um, OK.
Beginning next month, Visa is switching from charging 1 percent above and beyond any currency conversion costs to charging 1 percent simply for using your credit card in another country.
Visa's Bentz explained that this will ensure that all participating financial institutions are supporting the international payment system.
It just so happens, though, that the change will allow Visa to also reap its fee even when a transaction abroad is denominated in dollars, without any currency conversion involved.
For its part, MasterCard will begin separating its conversion fee from the purchase price, rather than coupling them together, so that banks (and, in theory, cardholders) will have a better sense of how much they're really paying.
But don't expect your monthly bill to specify anything other than that a fee was charged. (And even then, you might have to look closely. Citibank's statements, for example, will have a line indicating "Purchases*Finance charge*Foreign trans.")
"The fee either provides a service for consumers or it doesn't provide a service," said Consumer Action's Sherry. "It's a real mystery what the banks' fee does."
http://www.sfgate.com/cgi-bin/article.c ... e=business
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