In a new article written in the Charlotte Observer, Bob Ryan, the product-design and innovation executive for Wachovia’s credit-card division has the following to say about credit card foreign transaction fees: “While it was an easy revenue opportunity, we just didn’t think it was fair.” The article goes on:

The company calls credit cards a service for banking customers, and a profit center only secondarily.

Some smaller banks also refrain from imposing a surcharge, but the best deal is offered by Capital One Financial Corp., the fourth-largest card issuer. Foreign transactions are free. The company swallows the 1 percent fee.

Wachovia and Capital One say they make back the lost revenue by attracting customers and building loyalty, particularly among the small but affluent demographic of Americans frequently abroad.

The article is titled:

Beware credit-card fees on foreign buys

and tries to provide people a basic overview of what credit cards to use when traveling in foreign countries. It concludes with the following advice for people wandering what credit cards are bet for international travel:

Credit cards are the best way to make foreign currency purchases, travel experts say. Most charge a 3 percent fee, but that’s generally a lower rate than the alternatives. Still, regular travelers may want to find a card that charges a lower fee.

• Capital One charges nothing for transactions in any currency.

• Wachovia and some smaller banks charge 1 percent.

• American Express and banks including BB&T charge 2 percent.

Exercise caution if a merchant offers to convert the price to dollars. It seems like a way to avoid the surcharges. But the merchant is free to use a less favorable exchange rate, which can easily add more than 3 percent to the purchase price. Also, even though it’s called a conversion fee, some card companies charge it for any foreign transaction.

Though the article doesn’t use the words “dynamic currency conversion” speciffically, this is the process that takes place when a merchant offers to convert the local currency into your home currency at the point of sale. While this has the added advantage of allowing you to see the total price of your purchase at the point of sale, you are almost certain to get a worse rate with dynamic currency conversion if you are using one of the three credit cards above. American Express is a closed system and doesn’t allow additional dynamic currency conversion charges with their credit cards. With Visa and MasterCard merchants are supposed to allow customers to opt out of the dynamic currency conversion scheme, though some travelers have reported problems opting out. Merchants make money with each dynamic currency conversion transaction and therefore have incentive to pressure customers into opting in.

Click here to read the full article.

Every week this site gets thousands of comments and emails from spammers. I can’t complain. It’s just another week in the life of a blogger. Besides, I have a comment and email spam filter that eliminates over 99.9% of the messages. However, the spam filters can’t stop confused people with compromised reasoning from posting messages that expose their own personal information.

Occasionally we get random emails from people willfully sending us such information. As much as possible, we politely tell them this is a bad idea and try point them in the right direction. This week has been exceptional though. Several people have taken it upon themselves to post credit card numbers, account numbers, names, addresses and even social security numbers to the site.

One poor woman, we’ll call her Susan, writes to tell us that her credit cards were stolen while traveling and that she’d like us to help her freeze her credit card accounts. Since she posted her financial data online, it’s fortunate that she’s already planning to cancel those cards. Another poster, we’ll call him Richard, leaves his name and credit card number for no obvious reason except a cryptic “RE:” Our least favorite commenter, whose real name is Timothy, writes us at length threatening to have his lawyer contact us unless we quit mailing credit card offers to his home. Sorry Tim, but we don’t mail credit card offers and we’ve yet to hear from your lawyer. He also claims to have called us three times.

To make matters worse, ALL of these posts were made to the public comments section of this site! Unfortunately, if you’re one of the people who would post this type of information to the comments section of the blog, you probably aren’t reading this post or any other part of the site where we talk about why NOT to give your personal financial information to anybody other than your financial institution. This can’t be reiterated enough:

• Don’t wear a t-shirt with your name and social security number printed on it.
• Don’t tack financial statements to lampposts.
• And under no circumstances should you post credit card numbers to the comment sections of blogs!

The Government Accountability Office released a comprehensive report about credit card fees on Wednesday. Their key findings are that increased complexity in credit card rates and fees heightens the need for more effective disclosures to consumers. Though only a very small portion of the report discusses foreign transaction fees, some of their findings are directly relevant to travelers. Foremost is their general assessment of foreign transaction fees below:

Fee type: Foreign transaction;
Assessed for: Making purchases in a foreign country or currency;
Number of cards that assessed fee in 2005: 19 of 27;
Average or range of amounts generally assessed (if charged): 3% of
transaction amount (in U.S. dollars).

Unfortunately the report does not discuss dynamic currency conversion or the dubious practice of double charging card users for an international purchase where the consumer has already paid for the currency conversion. Interestingly some credit card companies justified higher fees by asserting that travel benefits have become standard:

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Earlier this year President Bush signed into law the “Tax Increase Prevention Reconciliation Act of 2005.” Buried in this legislation are measures that erode tax protections for Americans living overseas. Overseas Digest has written an excellent article outlining three factors that the new law changes. In short the changes are:

1. A marginally increased foreign income exclusion (this is actually a good thing)
2. The foreign income housing exclusion was capped at 30%. This could hit some pocket books pretty hard.
3. Housing expenses that are included must now be included when determining the marginal tax rate on other taxable income.

This week the Treasury Department released this notice which effectively increases the housing exclusion for some places:

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For most people the 2005 tax season is over, but for many travellers and expats it’s just beginning. If you’re one of 9.6 million taxpayers who filed for a tax extension, you’ve got less than one month left to get your forms submitted. Here is the official press release from the IRS.
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