Ripoff: Visa/Mastercard's "Foreign transaction fee"

I just got off the phone with Citibank after noticing a bunch of "Foreign Transaction Fees" on my bank statement -- turns out that when you use your credit or debit card outside of the US, Visa and Mastercard charge three percent in transaction fees on the spend. It doesn't matter if you use an ATM, buy over the Internet/phone, or walk into a store -- the credit-card companies always dip their beaks. When you pay your hotel bill, when you buy a plane ticket, every time you use to order a British release (Citibank told me that they even charge the fee when I withdraw from my Citibank US account while at a Citibank UK ATM, using Citibank's own network!).

What makes this such a rip-off is that the credit-card companies already charge a fee -- up to five percent! -- to the merchants for processing the transaction. So Mastercard and Visa are getting a slice from the store, and a slice from the customer. In a global marketplace, Mastercard and Visa are acting like letting you spend your own money is a special service deserving its own fee.

The Citibank rep I spoke to told me that the fee used to be one percent, and that it was hidden on the credit-card bills, but that in 2006, the fees tripled and Citi started to break them out on the bill so you could see how badly you're getting hosed.

I called up Citibank UK and asked them if I was charged any fees when I used my Citibank UK debit card outside of Britain that they told me that no, Citibank UK customers are spared this particular screw-job from the credit-card companies.

When you add it all up, the credit-card companies must be making billions off of American customers -- and all the while they're double-dipping, charging the merchants, too. Link

Update: Steve sez, "Most UK banks will tax you if you take money out of a foreign ATM or use the card abroad (Lloyds, Bank of Scotland, Barclays). Barclays does something truly bad: if you buy foreign currency or travellers cheques *in the UK* they hit you with the handling fee, even though they are not even converting the money. Take the money out of the ATM outside the post office and pay in cash, and you save. Not only is there no moral justification for this, its an odd trend. Imagine if banks started charging you more for alchol or eating out compared to supermarket purchases.

"Nationwide and Citibank are the unusual banks in that they don't make up a bogus fee and stick it on your cards when you go abroad.

"This shows that:
1. its a bank thing, not a Visa fee
2. its entirely optional
3. they do it, because they can get away with it.

"Consider encouraging your UK readers to open up an account with Nationwide just for routing money abroad."

Update 2: Matt Gross sez, "I’m a travel writer for the New York Times, and I got a Capital One Visa card specifically because it was the only one I could find that does not charge a foreign transaction fee. Of course, they give me loads of other problems (like freezing my account every time I actually charge something overseas), but at least I don’t have to pay an extra 3 to 5 percent!"

Matt Goff sez, "I'm moving to London from the US in April, so I've been researching the credit card f/x transaction fees issue. has a good summary of what ten major US banks charge for credit card, debit card, and ATM transactions in foreign currencies."

Michael Miller sez, "Wells Fargo is another American culprit bank for Foreign Currency Transaction fees. I've been living in Aotearoa (New Zealand) for 5 years now and a couple of years ago Wells Fargo started charging the 3% foreign currency transaction fee. 3% can add up to a lot of money if you're traveling abroad, especially when you add on Wells Fargo's $5 foreign ATM fee on top of it.

"I still need an American account for investments and a retirement account from my first job so last time I was in America I joined up with a local credit union which charges hardly any fees and only a 1% foreign currency transaction fee. The best advice I can give though is if you're working in large sums of money it's still best to open up an account at a good bank in a foreign country and transfer the money directly into the account.

"Truly American credit unions are a savior in a land of high fee thief banks. The idea that people can gather together and work in a non-profit way to make their lives better is a model that others needing essentials services should emulate. If America isn't going to offer universal healthcare for it's citizens then they should band together and make non-profit health care insurance unions. If there's one area of life that needs a non-profit union of citizens more than banking it's definitely health care."


  1. In the past credit card companies offering a 0% on transfers from 6 to 12 months would charge a 3% transfer fee. (min $10 max $75) I have noticed in the last few months they have lifted the max fee! Its not worth transferring a high credit card limit anymore! I have looked at every possible credit card company out there and they have all lifted the max fee! Shame on them! A few have even raised the fee to 6%! We have to pay the price for their sub prime screw up? I have excellent credit, have plenty of equity in my home and was floored when I went to take advantage of a “12 month interest free” transfer. And when I asked to waive the fee I was told NO….Buyer beware!! Get a home equity if you can, you can at least claim the interest on your taxes!

  2. There are some exceptions to this blatent ripoff, indeed Nationwide in the UK is the best example as they charge no fee whatsoever (although I can’t speak for the exchange rate they then give you…).

    But Barclays, Bank of America, Deutsche Bank, BNP Paribas, Scotia Bank and Westpac have formed a ‘global alliance’ and all waive the withdrawal fee (2%) when you make withdrawals from their respective ATMs using a partner bank’s card*. Which is a saving of about £1 out of £50. You still pay the 2.75% foreign transaction charge though. Even PayPal imposes a similar cross-border fee even if the transaction is in the same currency…

    * Be wary however that although some of these banks have branches in foreign countries their ATMs are not necessarily part of the same network. For example Barclays India is not, whilst Deutsche Bank India is.

  3. I believe it costs money to convert from one currency to the other so that’s why they charge a fee.

    Citibank also charges the lowest fee compared to any other American bank. So you got lucky.

    The UK countries all have the same currency so you’re not using foreign money if you go to a foreign country within the UK. If you go to Asia, though, there is a foreign transaction fee.

    The only time there isn’t a fee is when you have an extremely high minimum balance bank account.

    Seems like you’re just whining because you were caught by surprise.

  4. “I believe”… how about actually KNOWING instead of believing before criticizing? I take offense to your whining comment.

    No, foreign transaction fees are BANK dependent and has nothing to do w/ conversion rates. Have you ever actually converted money before? The cost of conversion is either,
    a. Adjusted in the price of the item you purchase, or
    b. Is an actual seperate charge. That’s right, conversion fee is SEPERATE from foreign transaction fee and is not the same thing.

    I found all this out after a visit to Europe in 2006.

    So in other words, when you use an ATM/Credit Cart for foreign purchases, there is:
    – Conversion rate
    – Fee charged to customer by bank
    – Fee charged to business by bank

    The first one, ok, nothing to do w/ banks. But the latter 2? Only there for them to rape people. The middle man is charging BOTH the customer and the seller. (Hm, and reflecting on current economic times… what did those banks do with all that money again? Oh yeah, they pissed it all over us).

    Furthermore, and this is where people really need to start paying attention… these fees do not mean you have to be outside the country. I made an online purchase from a Canadian company and was charged this fee. The company advertised in USD and bragged that it’s shipping rate was “$4.95 UPS Flat Rate, anywhere!”. It never occured to me to verify if it an American site nor did I think about foreign transaction fees.

    Also, had you been paying attention, banks have been hiding this fee up until 2006. THat means even if you poured over every document you had with a laywer and magnifying glass, you would have never known there was a foreign transaction fee… that’s changed today… but its still in small print buried in your terms of agreement.

    Lastly… the whole other “big picture” here is that through technology, we are becoming a global market. Someone in Brazil purchasing products from Hong Kong is becoming more and more common… archaic banking practices need to be re-defined. But they don’t get re-defined because of so much de-regulation, so no one is really wathcing these banks. they were allowed to roam free and now look… recession and corruption.

  5. Please note: conversion rates are indeed set by banks for most countries (floating exchange rates).

    All banks have multiple rates for a particular currency e.g. corporate rate, tourist rate, cash rate, travellors checks rate etc. etc.

    The banks are in control of your money, all money and in fact their money!

  6. I bought an item from a Hong Kong merchant called DealExtreme and paid for it using my Paypal account. I fund my Paypal account with my CITI credit card. When the charge from Paypal showed up on my credit card statement it also included the merchants name and location. (PAYPAL *DEALEXTREME 4029357733 HKG) CITI charged me a 3% foreign exchange fee on this charge because they said it was a foreign merchant. I disputed the charge, explaining they were paying Paypal which is in the United States and that Paypal is the one who paid the merchant in Hong Kong. They said it was foreign merchant and refuse to take off the charge. I then asked them to give me the address where they sent the payment. After three phone calls and numerous emails, I still have not gotten the billing address which would show the payment went to Paypal and not the Hong Kong merchant. I am at a dead end. Can anyone recommend what steps I can take from this point?

  7. I’m retired and have been living in Thailand for 5 years now. I’v been using a Wellsfargo visa debit card. I have over $100,000 in the bank and have not had to pay any fee, untill this month. The Thai banks are now charging foreigers’150 baht (about $5.00) per ATM transatcion.

  8. I am also in Thailand and have just noticed this fee as well, on all atm’s i’ve used. Any ideas how to get around this? Avoid the atms and go into the banks directly ?

  9. Poster 6- Although your Paypal account is in the US, DX’s paypal account is probably in Hong Kong. Paypal has “banks” worldwide.

  10. RE: PAYPAL – Citibank = Foreign Transaction Fee. I have been using my Mastercard to pay PAYPAL for purchasing an internet service in Switzerland. I have done this for 3 years, six times. A Foreign Transaction Fee was never charged on my credit card, only the charge to PAYPAL. My last purchase for the Swiss internet service (Rapidshare) was on May 27, 2009. My Mastercard monthly credit card bill came today. A Foreign Transaction Fee-Finance Charge had been added to my bill, separate from, and on top of my PAYPAL payment charge. Interestly enough, since my last purchase for the Rapidshare service, my original credit card company had sold my credit card account to Citibank. Citibank….

  11. I was charged a Foreign Transaction Fee for something I ordered from my home. Pro Resvera which is talked about on TV.

  12. Imagine my surprise when opening my late June VISA bill from Bank of America (BOA)…a whole bunch of foreign transaction fees (FTFs) charged, once on every British Virgin Islands purchase since the 1st of June! A place we visit several times a month on business and a place where we charge thousands of dollars every year previously without FTFs. I immediately checked online with BOA for my July charges and sure enough, there also was a charge for each and every purchase undertaken in the BVI, in this case, including a $90 FTF for our up-front Virgin Gorda Yacht Harbour yard fees for the summer!

    I next called BOA was told “it is new policy” and the charges could not be reversed. I called again to the customer satisfaction department and was told that they already told me the FTFs could not be reversed and the change was made on June 1st and these fees could not be reversed. I had similar discussions up a couple of levels until I reached a relatively high level service manager who did, in fact, removed all the FTFs charged since the 1st of June but stated they would be charged in the future. Telling them that they would lose our business which was considerable since everything, charter meals, fuel, docking, restaurants, insurance, yard fees, etc., thousands of charges each month for our business, goes on our VISA card, made no difference at all.

    After doing some research on the internet, I found the following link:

    wherein they had a June 10, 2009 article on this very thing stating:

    “A reader recently shared this bit of fine print received in the mail from her Bank of America credit card account. Read it and weep:

    “Amendment to Your Credit Card Agreement:

    “Effective on June 1, 2009, we are replacing the definition of “Foreign Transactions” in the section of your agreement titled Words Used Often in this Agreement with the following:

    “Foreign Transaction” means any transaction made in a foreign currency, and any transaction made in U.S. dollars if the transaction is made or processed outside of the United States. Foreign transactions include, for example, online purchases from foreign merchants.”

    Note this also applies to purchases made in, Sint Maarten/St. Martin, say at Island Water World (e.g. for a new dinghy and engine?) or any other charges transacted in good ole greenbacks!.

    So, after some 15 years with BOA, we will make a change. Further research tells me that there are at least three “major” credit card companies that offer NO FOREIGN TRANSACTION FEES:

    Capital One 0%
    Schwab Bank 0% – Schwab Bank Invest First Visa
    Stanford Federal Credit Union 0% – SFCU Visa Cards

    I’m sure there are others. Happy hunting!

  13. I was shocked when I discovered that my AA Citi/MasterCard charged a 3% “foreing transaction fee” for a purchase of an ELAL flight ticket NY-Tel Aviv-NY, that I purchased over the website, in the US. The ticket was purchased in dollar currency, the invoice I received from ELAL is in dollar amount ($1423,40) and it clearly states that there will be no additional taxes nor monetary supmenents, so I was confident that would be it (already an expensive ticket, right?) Of course ELAL is not responsible ot this awful charge, but at least they could make us aware that if we purchased a ticket over the website we may be incurring in a 3% “foreign transaction fee” if we use V/MC. (I don’t know about AmEx, someone told me I could have avoided the charged if I used an AmEx card).
    There was no way for me to anticipate this transaction fee. It was very clear to me that the transaction was processed in the US (US currency, US invoice, English-language website). It seems that ELAL processes website transactions at their Ben Gurion Airport, Israel, and this is why the credit card considered it to be a “foreign transaction”. Not that I purchased over the website -that doesn’t matter. For the credit card, it is the same as if I was in Israel and I purchased the ticket over a counter there. Funny, ha?
    I called the credit card company. I complained and said I would dispute the charge, and the customer service representative screamed to me (Yes, she screamed) No! You cannot dispute this charge!!!!
    I will, of course. F…ing credit cards!

  14. I used a balance transfer promo offer with AAA BofA visa in APR09. The one that comes with the convenient checks. The offer said as long as an eligible transaction posted to the account by the statement close in MAY09 the offer would be open through MAR10. Of course it advised that you needed to read the fine print which I did and found that the “transaction fee” was 3% min $10, max $75. (in MAR09). Using the same offer again in AUG09 (the one that is supposed to be good until MAR10) we found there is NOW no cap on the “transaction fee” which is NOW 4%. After several calls and faxes to the bastards noone can tell us that transaction fees change without notice only that the original offer expired in MAY09 – even though the documents I just faxed them states otherwise. They didn’t have a problem transferring the money and charging to exponential fee, though.

    Thanks AAA (that’s American Automobile Association) and BofA (that’s Bank of America – the one whose CEO is so big in the news here lately). We REALLY LOVE you guys. Just another case of “The Man” trying to keep “the brother” down.

  15. Mobil Citi/MasterCard charged also my card for a 3% “foreign transaction fee” for a purchase of a international flight ticket plus $3.50 “foreign transaction fee- finance charge”, that I purchased over the website, in the US. The ticket was purchased in dollar currency, the invoice from flight company was also in dollar amount ($1423,40). I am sure this is a charge of either Citi or MasterCard not the flight company.

  16. I live in Panama and the US dollar is their currency so if the foreign transfer fee is somehow being calculated for exchange rates this exposes how ridiculous Bank America for my Masters Card and Chase on my Visa card are. They are acting on a false premises.

  17. This may be a US thing. I just checked statements for my (Canadian-bank-issued) Visa card and I don’t see any such fees. Or maybe they just hide them in the exchange rate.

  18. I was being charged 16%pa interest rate and I then did a balance transfer from another card which was charging 18% After the transfer Citi put the interest rate up to 32%
    I then paid for another balance transfer to citi to pay off my account. I have now received a statement saying I owe 1.08 which they have added 4956% interest making a total of £53.22
    I telephoned then to make an immediate payment to close the account and found that this figure had now grown to £54.50. I paid this amount because, as I said the the gentleman in Delhi that in the time it takes for me to read out a 16 digit card number they would have increased the amount I owe.
    Dissatified I called back and spoke to someone else who told me that I did in fact only owe £53.22

    This company stinks and is only interested in ripping people off.
    They have no email address and can only be contacted by speaking to Indian call centres manned by people with a very poor understanding of the English Language.

  19. And it seems it is getting even worse.
    I purchased an electrical cord for my daughter’s computer on ebay and paid the seller using Paypal.
    To my suprise, my credit card company charged me a 3% foreign transaction fee for the Paypal transaction.

    This is utterly ridiculus.

  20. I just made a payment through “Pay-Pal” to a company in Hong Cong. I was charged a $20.00 fee for this by my bank, as a “IAT” or International Account Transaction. I called my bank, and explained that I had made numerous purchases in the past, to international destinations. They said “You were just lucky we didn’t catch those fees”. I was mortified. I will research a bank that will explain any hidden costs, before I decide to place my money there…Spender Beware!

  21. Worse, PayPal now does their currency conversion almost 4 points lower than the current lowest rate (meaning that you are paying more for your overseas currency). Then there is their foreign transaction fee (fixed minimum plus a percentage). Then the credit card people take their foreign transaction fee.
    I frequently purchase small items internationally to take advantage of differences in currency rates (ok, it might only be 10 or 20 bucks, but I don’t actually earn that much so is a big deal to me). This last transaction (last week) is an example – the various fees etc added nearly $16 dollars to a $240 transaction. Bah.
    Local retailers (I’m in Australia) don’t even bother to hide the extra bank charges – they will charge you extra to buy with credit card because the banks charge them.
    –related side issue —
    And because of all the extra dippiing, retailers have joined the gang… local markup is insane.
    Pretty soon it will be cheaper to fly to some country with cash in your pocket, walk into a credit union and buy local currency, then walk across the road to buy the item you want, then go home.
    Seriously, I am saving for a replacement laptop and right now, this very minute, I can fly halfway round the world to buy the model I want and get back. And still have change in my pocket. Cheaper than local retailer (same retailer even), cheaper than the extra CR Card fees etc.
    Totally ludicrous.
    –end of side topic–
    Spleen vented.

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