July 26 2010|04.12 PM UTC

Alex Gutow

Viva La Resistance! Fighting credit cards’ foreign transaction fees

Category: CreditTags: ,

With summer in full swing and the dollar getting stronger, many of you may be looking at travelling internationally in the coming months. Credit cards are a convenient and safe way to pay for vacation expenses since they are easy to cancel in case it is lost or stolen and they automatically track all charges. You can even earn rewards from many cards, allowing you to rack up the miles for next year’s vacation!

However, as we wrote about in our “10 Loopholes the CARD Act Didn’t Close” post, there are a few new fees being tacked onto your credit card bill these days.  A recent study by Pew Trusts analyzed the extra fees (annual fees, transfer, foreign transaction) that credit card issuers are passing along to customers.  According to their research, 91% of bank cards and 57% of credit union cards charge an international transaction fee.

This international transaction fee is basically charged to your account every time you make a purchase outside the United States. The amount charged is a percentage of the transaction cost, with the average being 3% for bank cards and 2% for credit union cards. Pew found that some banks even charged different fees depending on whether the transaction was in US dollars or not.

To help you save money on your vacation, BillShrink decided to do our own research to see which credit cards had little to no fees. We are happy to report that CapitalOne does not charge an international transaction fee. Not only that, but it will eat the 1% fee that MasterCard imposes!

So before you pack your bag to head overseas, you might want to sign up for a CapitalOne card such as the No Hassle Miles Card (rewarding you with 1.25 miles for every $1 spent) or the Orbitz Visa Platinum (rewarding you with 3 points for every $1 spent on Orbitz and 1 point for every $1 otherwise).

For the other issuers that do charge international transaction fees, USAA charged the lowest fee at 1%. Discover and First National Bank of Omaha only charge customers 2%, while American Express charges customers 2.7%. All other major credit card issuers charge their customers 3% of the purchase amount for foreign transactions.

Before travelling abroad, remember to call your credit card issuer to get a detailed breakdown of any fees you may incur and to let them know where you’ll be. That way they won’t deny your card while you’re practicing your French at a corner bistro.

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{ 1 comment… read it below or add one }

John Jones August 30, 2010 at 4:02 pm

Bernanke likes to remind everyone that he is an expert on the great depression and knows how to prevent it from happening again in the US. Apparently he is also an expert on Japan and its struggle with chronic deflation following its housing bubble in the 1980′s. In fact Bernanke wrote an article in 2000 titled “Japanese Monetary Policy: A Case of Self-Induced Paralysis,” where he goes on to lecture BOJ officials about what they could and should have done differently in order to to avoid a deflationary outcome. He goes on to postulate that the BOJ was not trying hard enough to stimulate the economy and that 0% interest rates are just one tool to beat deflation. The Fed Chairmen even goes so far as to assert that he knows how to escape a liquidity trap caused by 0% interest rates. The reason I bring this up is because it gives people a good idea of what Bernanke’s next move may be. The US is dangerously close to falling into the dreaded “liquidity trap” as deflation takes hold and monetary policy loses its effectiveness.

Here are some of his suggestions to the BOJ:
http://blackswaninsights.blogspot.com/2010/08/bernanke-explains-how-to-escape.html

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