Ripoff: Visa/Mastercard's "Foreign transaction fee"
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. Bankrate.com 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."
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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!
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.
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.
"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.
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!
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?
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.
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 ?
Poster 6- Although your Paypal account is in the US, DX's paypal account is probably in Hong Kong. Paypal has "banks" worldwide.
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....