Some readers tipped us off to CitiGroup’s recent recent decision to increase foreign transaction fees for using their ATM card internationally. The rate increases come just in time to catch travelers as they set off for the holidays. Those who actually read the fine print and realize that the fee has gone up now face higher fees for their purchases this holiday season or will have to bear the extra costs until they have time to find a new bank.

The new fee is 3%, up from 1%, with conditions applying for using the card at another bank’s ATM.

An interesting comment from Ingvar Strom suggests that CitiBank might also be skewing the base exchange rate upon which they add the foreign exchange rate to. If Strom’s right, the effective fee that CitiBank is charging could be considerably higher than 3%:

Then in 2006 I started being charged a foreign fee of 1 percent on top of the conversion of 1 to 1,5 percent over the FX prevailing market value. And now in December (nice Xmas gift!) it seems looking at some recent transactions you have increased the foreign fee to 3 percent and the conversion Euro to USD seems closer to 3 percent over prevailing FX spot rate. Thus from my point of view the cost of using your ATM card for ATM withdrawals/purchases in foreign currencies has gone up by whopping 400 percent in a span of a year and now costs an exorbitant 6 percent! And this happened without the decency of advising customers, which is really a shabby business practice I did not expect from a world-class company.

Click here to read more about CitiBank’s ATM fees in the directory. Please post your comments there as well.