While recent class action lawsuits have forced credit card companies to more openly disclose fees and allowed people who have been charged foreign transaction fees to recover those payments, many credit card fees have remained dubious or difficult to decipher. Finally, after 2 1/2 years of studying, the Federal Reserve Board has proposed sweeping changes to the way credit card companies disclose and charge fees. The report does discuss foreign transaction fees, and does propose some changes about the way they are disclosed. However, I’m still weighing whether the new guidelines go far enough. Keep reading for changes travelers should expect.

Generally speaking, perhaps the most significant change is that the proposed rules would require companies to apply new payments to the debt carrying the highest interest rate. Currently, many credit card companies apply payments to the balance with the lowest interest rate first. This delays the time it takes for customers to pay off the high interest rate balance, thus increasing the total cost paid for carrying a credit card balance. Customers caught in this trap are often not aware that their total outstanding balance even has two different interest rates being applied.
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I’ve been following a thread on the ebay forums about a controversy surrounding foreign transaction fees that PayPal started charging its Canadian users. Apparently, PayPal began charging the fee with little to no disclosure on transactions made with the PayPal debit card even if the transaction was made in Canada and in Canadian dollars. To make amends, PayPal agreed to refund fees on purchases made between October, 2006 and June, 2007. A PayPal representative had this to say:

I want to apologize for the time it has taken to respond with the necessary information. After reviewing your concerns, we have decided to refund all cross border and cross currency transaction fees paid by Canadian users between October 11, 2006 and June 1, 2007. The refund will be completed by June 30, 2007.

Please note that all cross border and cross currency transaction fees incurred after June 1, 2007, will not be refunded. To ensure that we do not have further confusion, we will change our user agreement to include this fee instead of relying on the agreement that user’s accept at sign up for the PayPal Debit Card.

Please accept our apology regarding this issue. I also want to thank the individuals who brought this matter forward. I feel this has once again proved the power of community and what we can achieve working together.

After June, PayPal will continue to charge the foreign transaction fees on purchases the same as before, so not much will change overall. It appears that PayPal has now updated their website to clearly state what their foreign transaction fees are, but this case highlights yet another example of companies not plainly and openly disclosing foreign transaction fees. This story has a happy ending, but only after customers took action make it so. At least, to PayPal’s credit, no legal action was required.

I’m scanning my RSS feeds as I usually do, when I come across an MSNBC article, “Travel Abroad for Less: Cut your expenses by keeping an eye on the cost of money.” I’ve seen enough of this type of article to have a pretty good idea about what it’s going to say, but since I’m always looking for some interesting tidbit to post, I can’t resist the urge to click. The article starts me off with the usual fluff:

You’ve got your passport and your walking shoes. You’ve spent months assembling an itinerary and brushing up on your Renaissance art. You can almost feel yourself drooling while imagining that first taste of real Italian gelato while strolling through cobblestone streets.

Alright, I’m really feeling that urge to go to Italy now — I can almost taste it. Please do tell how I’m going to save thousands on that gelato! The answer? Find a credit card that won’t charge you a foreign transaction fee on international purchases:

The survey found that both Visa and Mastercard (NYSE: MA) create profits by charging 1% processing fees for purchases you make in foreign currency, and card-issuing banks tack on an additional fee. Many cards, including those issued by Citigroup (NYSE: C), Wells Fargo (NYSE: WFC), US Bancorp (NYSE: USB), and GE Money (NYSE: GE), charge as much as 3% on what you buy abroad. On the other hand, at least one card issuer not only doesn’t charge its own fee but also reimburses you for the Visa/Mastercard fee. (You can sneak a free peek at that bank issuer with a free Green Light trial.) [See for yourself...]

What?! I do a double take. There’s a credit card issuer out there who won’t charge me a fee, but I need to sign up for a “free trial” of Green Light to learn who it is? Now I already know there’s a credit card that reimburses fees charged by Visa and MasterCard, but I was surprised that I needed a free trial for them to tell me. (If you don’t know what the credit card is, read on, I’ll tell you — for free!) For starters, I’m reading MSNBC, so I figure the news will come with no strings attached. To MSNBC’s “credit,” this is really a “Motley Fool” article which MSNBC is reprinting, and I’m only writing about it to offer a segue into naming the mysterious card that will likely be revealed when you sign up for the free trial of Green Light: Capital One.

I’ve seen several posts from readers questioning whether Capital One has changed their policy on reimbursing card holders’ foreign transaction fees that Visa and MasterCard charge. The answer, I think, is no. Capital One still does not pass along the fee. After grilling card service representatives and scouring my credit card’s fine print and terms of service, all indications are that Capital One has not changed their policy. I’ve also manually calculated fees on foreign purchases made with my Capital One credit card and do not see any evidence of a 1% fee being assessed. Of course I don’t work for Capital One and can’t speak officially for the company. And since other readers are apparently getting mixed signals when communicating with Capital One, this might be worth keeping an eye on.

Furthermore the Washington Business Journal recently reported (for free, believe it or not) that Capital One is slashing 280 jobs and restructuring their credit card unit:

“This decision is about creating efficiencies and enabling innovation so that we can continue to compete effectively in a mature card environment,” Rakes said. [Read more...]

Changes are definitely afoot at Capital One, and I get a little queasy when businesses start talking about “creating efficiencies.” I suppose we’ll find out eventually whether, in addition to firing 280 people, these efficiencies include increasing card holder fees.

Finally, I didn’t sign up for a free trial of Green Light. I’m only assuming that the card issuer is Capital One because there is only one credit card I’m aware of who doesn’t charge foreign transaction fees. If I’m wrong, please be the one to let me know!

It’s not uncommon for me to get “best of” questions, such as:

• What is the best travel insurance?
• What is the best debit card?
• What is the best way to exchange currency?
• Where is the best place to get discount airline tickets?

I believe these question do have answers, but I also think that “the best” product or service also varies depending on individual needs. Secondly, while I often have my own opinion regarding what the best product or service is for my own particular situation, I can see other products being better for people in different circumstances. That’s why I’m usually very tentative when answering “best of” questions.

That said, in my experience, the most informative answers to “best of” questions come from communities such as this one. In my view, groups offer the best answers to “best of” questions — the best of the best if you will. That’s why we’re adding a new polling feature to answer frequent “best of” questions. To get things rolling, our first user survey will answer perhaps the most common question I’m asked: “What is the best credit card for international travel?”

A few obvious factors to consider include:

• What kind of travel benefits does the card have?
• Does the card have travel rewards?
• How much does the credit card company charge for foreign currency transactions?
• Can the card holder be charge for dubious DCC transactions?
• How good is the credit card’s customer service — especially when it comes to reporting theft or loss from a foreign country?
• What is the card’s annual fee?

Anyway, you get the idea. Here’s the poll:

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