Lions, Tigers and Foreign Transaction Fees. Oh MY!

Part of the confusion surrounding the fees that credit card issuers charge to make purchases in foreign countries stems not only from the problem of who is actually charging the fee, but also from the name of the fee itself. We’ve often hear of customers calling their credit card company to ask about foreign transaction fees only to receive inaccurate or confusing information simply because they asked the wrong question.

Until recently, credit card issuers would only charge a fee for a purchase in a foreign country if that purchase was actually made in a foreign currency. As such either the phrase “credit card foreign conversion fee” or “credit card international conversion fee” was accurate and made sense. However, several credit card issuers have started charging a fee for ALL purchases made in foreign countries regardless of whether that purchase was made in a foreign currency or not. This charge is applied despite the fact that the credit card issuer only incurs an expense if the purchase was made in a foreign currency. To justify this practice, the guilty credit card issuers argue that customers who make purchases overseas require “special services” such as an international phone number to call. The truth is that foreign transaction fees are a big money maker for credit card issuers, often exceeding 300% of the actual expense incurred. Regardless, as more credit card companies begin charging fees even if the purchase is made in US Dollars, a more appropriate name for the fee becomes “foreign transaction fee” or “international transaction fee.” Though perhaps more technically accurate, your credit card representative should know what you are talking about if you ask about “foreign conversion fees” because this is still perhaps the more common name for the actual fee. On this site we use these names for the fees interchangeably:

• Foreign Transaction Fee
• International Transaction Fee
• Currency Conversion Fee
• International Conversion Fee

But just because your credit card representative should understand what you are asking about if you call the fee by any of these names, it doesn’t mean they do. In many cases they have no idea what you might be asking about. Some of our editors have even been told by some companies that there is absolutely no fee whatsoever. As we emphasize though, the actual representatives are not to blame, so don’t take your frustration out on them. They are often either poorly informed or undertrained. If the information they’re looking for isn’t on the screen in front of them, they probably won’t know the answer. The fact that a lot of people call and ask about the fee giving it the wrong name doesn’t help. The fee is NOT an “exchange rate fee,” “international fee,” “currency fee,” “foreign purchase fee,” “exchange fee,” “transaction fee,” or . . . well, you get the idea.

Even after calling the calling the credit card representative, asking about the fee by one of its proper names, and being lucky enough to get a well-informed representative on the phone, there is still one last complicated question that you will almost never get a straight answer for: who is actually charging the fee. In fact, we get a good answer to this question in less than 1 in 10 calls! When credit card company representatives actually have an answer, they often only have one number to give (usually between 1-5%). If they say 0% they are 100% wrong. Hang up politely and call again. The reality of the fee is that with rare exception, the fee is usually charged by two separate entities. Visa and MasterCard both charge a reasonable 1%. However the issuing bank can then tack on an additional 1-4%. Credit card representatives almost never know if the number they’re giving you reflects the amount that just the bank they represent is charging or if it constitutes the total fee charged. To make matters worse, most times the “terms and conditions” sent with your credit card doesn’t specify or break down the fee. Most often the number they provide is the total fee charged. However, there have been instances when only the issuing bank’s fee has been provided. Since most card companies don’t specify the percentage charged on monthly statements (they regularly only include the actual dollar amount charged), the chance you’ll get a straight answer is rare to none.

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See the complete list of transaction fee comparisons in the conversion fee directory.