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rkr4cds Feb 4, 2007

from the www.boingboing site: (Love the 'dip their beaks' - new for 'their hand in your pocket'...)

Saturday, February 3, 2007

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 Amazon.uk 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. 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."

posted by Cory Doctorow at 11:40:00 AM permalink | Other blogs' comments

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melissa Feb 4, 2007

Hi Bobbie

Here in New Zealand,  I think we pay 1.5%.  But it's stated in the "rules" that are printed on the back of visa bills and advertised other places too.  That's because most of the major banks have faced court charges in the past few years because they didn't declare to customers that this was the case.  All the banks that were doing it were fined and also had to reimburse the customers the fee for those years when tey didn't declare it. 

That's why I only shop at places that use paypal.  Mind you...dodginess isn't limited to big banks.  I wanted to buy a product the other day and could only find it from one seller on ebay who'd ship outside the US.  I liked a lot of their other product and intended to add more to my order and to make future purchases with them.  I knew the things I had wouldn't fit into a global priority envelope - some things were in jars so emailed for a combined shipping quote.  Their response was that they would shove it in a global priority envelope "probably" and that I would have to pay an extra ten % of my purchase total as I was a foreigner - um paypal would charge them .50 for foreign transaction fees.  I know because all my paypal fees are foreign, and while I'm used to paying an extra $2-$5 for handling a foreign order, if you're just "shoving" it in a paypal envelope, well you're not incurring any extra costs for packaging.  The products that I intended to buy came to a total of over $200 - so I'd be paying over $20 just because I'm not American. 
So not shopping with them....but now still wondering how to get my product.

The one store where I can buy the stuff, I got all the way to the checkout and they wouldn't give me the option of paypal even though they accept it for US customers and I refuse to use my credit card because of the lousy exchange rate and extra charge.   Well that's my rant!!

Acipenser Feb 4, 2007

Grrr    yes, banks and credit card companies overcharge heavily both from the shops and the cardholder. In the end its always the cardholder who pays, as the shops have to build the fee into their pricing. Actually, that's a not ok either since shops save on security measures with mainly card transactions and little cash to protect.
Here in Sweden most banks charge 1.65% in currency exchange fee when the card is used abroad. If we take money out of an ATM abroad there will be 5% or a minimum of about $6 as cash withdrawal fee. There are however banks which don't have these fees and I use a card like that for all internatioal purchases. Its the small niche banks, usually internet based with few offices, which compete with smaller or no fees. Within the EU special laws require that banks charge the same fees between countries that they charge at home. So even my otherwise 1.65% bank doesn't charge anything in EU countries. Sweden doesn't have the Euro (yet  ), but exchange to and from Euro is free by law.