Many consumers are not aware that when they shop abroad or in any foreign country, most purchases made with a credit or debit card carry a charge for the conversion of the currency. Before you begin your trip, one of the first things you should do is to call the credit card issuer and ask what fees will apply to your purchases, both in local currency and in dollars. It is also recommended that you call before each trip, as these policies may change without notice. Also, inform them of where you plan to travel and for how long you plan to be gone so that the sudden international activity on your credit card account doesn’t activate their fraud alert system and freeze your account.

There are two separate fees to convert your foreign-currency purchases to U.S. dollars. The total percentage charged is listed under ‘debit and checking card purchases’ in your credit card agreement under the heading ‘foreign transaction fees’ or ‘international conversion fees’. An additional fee may also assessed by each card issuer and bank for ATM cash withdrawals. ATM charges vary for each card. Here’s what you can expect:

• One percent (1%) commission charged by Visa, MasterCard, American Express or Discover for the conversion
• Two - five percent (2 - 5%) charged by the issuer or bank that is NOT a currency-exchange commission but another way to earn extra profits

These fees are standard, reasonable and highly competitive and you would be hard pressed to find a better rate on currency conversions of less than $10,000. They typically beat the rates of those you’d pay to cash traveler’s checks or convert U.S. dollars at a change bureau or currency conversion stand at airports by a significant margin. With rates vary depending on the issuer, by choosing the right card, you can save a significant amount of money over the course of your travels. And, if you have a Capital One or Discover card, you won’t pay any fees at all — They are the only major issuers that don’t charge its own currency conversion fee or pass the one from Visa and MasterCard on to the consumer. The following fees were recorded in April 2007:

• Capital One - no fee
• Discover - no fee
• Washington Mutual - 1%
• Wachovia - 1%
• American Express - 2%
• Bank of America - 3%
• Fifth Third - 3%
• Chase - 3%
• Citibank - 3%

As banks lose income from traveler’s checks, they’re looking for new ways to extract money from overseas travelers. Check your bank’s policy on conversion and transaction fees. If you feel that your bank’s fees are unreasonable, look for a less greedy bank.

Posted in Credit Tips, Card Advice

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