Fee Alert: Watch Out for the New Foreign Transaction Fees

I first heard rumblings about changes to foreign transaction fees last week. A reader wrote in a complaint about her credit card charging a 3 percent foreign conversion fee on an international airline ticket purchase made online in U.S. dollars. Here's an excerpt from her email:

I have a problem with Citibank MasterCard which imposed a 3% foreign transaction fee (~$150) on my online purchase of tickets with Malaysia Airlines recently. The online purchase took place in New York at work. I had no idea of this new rule until I read the credit card statement. I called Citibank customer service, they'll not waive the fee because Malaysia Airlines is a foreign-based company. I kept telling them I did the online internet purchase in NYC not outside U.S., and I should not be charged for the extra fee.

It seems like a fluke – but these days, don't put anything past the credit card companies. Then I got a letter from Bank of America confirming my suspicions. You can click on the image to read the scanned version. Here's the text of the notification:

We are expanding the definition of "Foreign Transactions" to include transactions in U.S. dollars if they are made or processed outside the United States. As a result, these transactions (posting on or after June 1, 2009) will be subject to the Foreign Transaction Fee, currently 2 percent of the U.S. dollar amount of each such Foreign Transaction. This fee is in addition to any other applicable transaction fee.

Amendment to Your Credit Card Agreement:
Effective on June 1, 2009, we are replacing the definition of "Foreign Transactions" in the section of your agreement titled Words Used Often in this Agreement with the following:

"Foreign Transaction" means any transaction made in a foreign currency, and any transaction made in U.S. dollars if the transaction is made or processed outside of the United States. Foreign transactions include, for example, online purchases from foreign merchants.

Blerg. Foreign transaction fees were already one of the more heinous credit card charges – the fee amount is usually buried in with the converted currency amount and is very difficult for a traveling cardholder to identify.

Now it sounds like you'll have to worry about picking out these fees from purchases made within the United States too. In particular, watch out for booking flights or hotels with international companies or shopping online with merchants that aren't based in the U.S. 

It's difficult to tell from this disclosure exactly what will count as a foreign transaction. If you spot a foreign transaction fee on your credit card statement for a purchase made from within the U.S., please share your report with us by email or in the comments section below. We'd love to compile a list of retailers and companies that are adopting this new definition as they conduct their business.

Emily Peters – Credit.com's personal finance expert and former TransUnion credit bureau insider. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com editor.

Comments

[Mark Arthur]

FYI, I recently received a notice from B of A that they were "enlarging their definition of foreign transactions" and would be charging FOUR PERCENT for them. Can anyone point me to different cards or banks (not on govm't life- support)that don't charge this ridiculous fee, or charge less? Is there ANY competition left in this universe? Someone needs to show them we're paying attention...

[Mark Arthur]

Oops - I see that the notice scanned in the main post is the same one I received, so my info is redundant. Still, any thoughts on how to divorce these clowns and find a better card would be appreciated.

[EmilyPeters]

Hi Mark - Sorry to hear that you got the notice too. Unfortunately, there are very few credit card issuers immune to these fee and rate changes. Capital One doesn't charge foreign transaction fees. You can browse Capital One offers here: http://www.credit.com/products/credit_cards/capitalOne.jsp

[David]

I bought an item from a Hong Kong merchant called DealExtreme and paid for it using my Paypal account. I fund my Paypal account with my CITI credit card. When the charge from Paypal showed up on my credit card statement it also included the merchants name and location. (PAYPAL *DEALEXTREME 4029357733 HKG) CITI charged me a 3% foreign exchange fee on this charge because they said it was a foreign merchant. I disputed the charge, explaining they were paying Paypal which is in the United States and that Paypal is the one who paid the merchant in Hong Kong. They said it was foreign merchant and refuse to take off the charge. I then asked them to give me the address where they sent the payment. After three phone calls and numerous emails, I still have not gotten the billing address which would show the payment went to Paypal and not the Hong Kong merchant. I am at a dead end. Can anyone recommend what steps I can take from this point? David mechanicsville, Virginia

[Emily]

Hi David - What a nightmare! Have you tried contacting PayPal about the charge?

[San San Wong]

Citi Bank is definitely charging the 3% foreign transaction fee to items I bought online within the USA. The first one was a company based in Michigan (but headquartered in Canada with me trying to buy a game from Italy that they are ordering in bulk but I'm buying from them). Due to the "foreign" headquarter, they charged me the fee.

They did take it off from me after I asked and told them I actually bought the item from the Michigan company, not Canada...

Now they are doing it again after I booked a hotel for Hong Kong (apparently I booked it on a "foreign" company website).

It's annoying because I am not purposely looking at the website to think whether or not it will be foreign.. the new definitions are bogus!

[San San Wong]

sorry, i forgot to mention: my booking at the hotel was made in English and in USD currency. That's why I didn't think it is a "foreign" transaction. Is there a way for me to argue it to my case with the citi bank rep?

[Frustrated Citi Card Holder]

I was charged Foreign Transaction Fee by Citibank Mastercard for purchasing airline tickets on United Airlines from MakeMyTrip.com, NY. Yes, it is an international travel. But I was quoted in US dollars, and I also spoke to them at a US telephone number, and the receipt shows New York address. The travel is on US based airline.

I got the Credit card statement today, and was surprised with the charge. While searching online, I stumbled on this page. I plan to call Citi Customer Service. Do I have a case? Thanks.

[Sandy Simpson]

I recently had a foreign transaction fee assessed by Citibank AAdvantage Mastercard for an online purchase at Canadavet. This is a new card acquired in April 2009. When I saw the fee, I immediately called Citibank and they said it was a foreign transaction. I told them I purchased it online in US dollars. They gave me some hogwash about the company probably submitting the transaction in their currency. I called Canadavet and they said they did not do it that way. Too bad, so sad attitude from Citibank.

Then I decided to make another purchase using my Bank of America Visa card since I had used them previously in July 2008 and January 2009 purchasing from Canadavet with no foreign transaction fee assessed. Well, here it is and I'm assessed another 3%. Luckily, I came across mail from BOA stating that they would be charging 3% on purchases made within the US in dollars when the company is outside the US. This was to take place June 1, 2009 and my merchandise posted on June 2. Dumb luck on my part.

Then I looked at my Citibank statement again and called them to see if I could find out when their foreign transaction fee took affect. The customer service rep could not give me an exact date but said it was sometime in 2008. He's supposed to send me literature on the effective date. This is nonsense. I can understand making a purchase with your credit card while you're visiting a foreign country and being charged a fee but to purchase something on the web from the US in US dollars and be assessed a fee. This is ridiculous. I now wander what is going to happen to the online airline purchases I made in US dollars with foreign airlines (Air France and LAN). I have been billed for them on my Citibank Mastercard last month and did not notice a foreign transaction fee. I guess they will hit me with it next month. I also wonder what will happen with my hotel reservations. I have made reservations online with Radisson for my trip to South America and they are showing the fee in US dollars. I wonder if I will be charged extra once the bill is posted. Is there any Federal agency we can complain to?

Frustrated Sandy

[Brandon]

I also noticed the 3% fee in my Citi statement this month when I purchased plane tickets online from EVA Airways which is based in Taiwan. The transaction was in USD, and I've bought these tickets every year, this is the first time I've been charged this fee. I've contacted EVA Airways at their San Francisco/LA office, and they stated that this should not be considered a foreign charge.

When I contacted Citi by phone and by email, I didn't get a clear answer on if or when the definition of "foreign transaction fee" has been changed. One person said "recently," and another person quoted "2005." One email reply simply and conveniently ignored my question.

My conlusion is that if the company's address shows up as non-US in your statement, then the foreign exchange fee will be applied. In my case, the address of EVA Airways shows up as "TAIPEI, TAIWAN" in the statement.

I've also contacted American Express, and what the agent told me concurs with what is in the agreement, that foreign exchange fee will be charged when the transaction occurs in foreign currency.

I've contacted my local news station/newspaper and asked them to investigate this issue. I also plan to fire off some emails to my legislators and senators.

In the meantime, I'm looking to Capital One, which does not charge a foreign exchange fee at all. But who knows, maybe they'll follow the trend as well.

[Tammey]

I just fought with B of A for 30 min. about several foreign transaction fees (3%) on my credit card. I bought several books from Abebooks online (set up like half.com...with many sellers selling their books). Although I was invoiced from individual sellers with my totals in US $, and all sellers within the US...abebooks billed me and it turns out they are in Canada. I told B of A that I was invoiced by individuals within the US, not abebooks...they did finally reverse the charges, but told me that I needed to research where each company is HQ before I buy from them. I told them that was ridiculous! Abebooks sent me an email saying that they are trying to lobby congress to try and stop the banks from charging these fees.

[birgit]

Like many I noticed the transaction fee for a British Airways airline ticket purchased on line in USD a couple of weeks ago. On calling my credit card bank three different agents (one telephone call) gave me conflicting information and basically said the problem was with BA. Finally I called BA and they confirmed that some customers have had this problem recently! However, BA claims that they only handle anything $$ on their US website and submit amounts in $$ to credit cards. --- Calling back, the bank now told me that letter gone out in April regarding this. The wording was very vague to say the least. I insisted to be told what amount my $ purchase had been converted into. No answer. However, when I asked when this had gone into effect, they said April 1. This is incorrect as the notice states it to go into effect June 1. My ticket was bought May 27 but posted on the credit card June 2. !!! The bank credit card agent gave me a "one time curtsy waiver" of the fee. Bottom line: I shall put that card at the back of my wallet and find a new one that doesn't favor such practices.

[Mei]

I was charged the foreign transaction fee by CitiCard for my airline ticket. It was purchased online with a foreign airline company, but calculated and charged in US dollars (and the departure city in within US, so by all means it should not be regarded as a foreign transaction). I called the customer service, the rep told me a really ridiculous and stupid reason: she said even the airline company used foreign currency so Citi Bank needed to convert it to US dollar. I told her from the very beginning that airline company charged in US dollar, and I never receive any notice regarding this charge (I really don't), so she said she will make a request for me on this fee. I will call them back tomorrow to see how they solve this issue. Anyway, I think the new foreign transaction fee totally makes no sense. What a greedy bank!!

[Michelle]

Bank Of America is charging the foreign transaction fees. I purchased medication from a Canadian pharmacy which was processed and shipped from Ft. Lauderdale, FL. I purchased a book from an international author so how do I know where he lives? The book shipped from New York

[Frustrated Citi Card customer]

I recently made charges to my Citi visa card for airline tickets from the Virgin Atlantic website. The trasaction was in US dollars. I was surprised to see a 3% foreign transaction fee in my statement. I spoke to Citi's customer service who credited me 50% of the fee - to make me happy I guess. I think it was not a good enough attempt to appease a customer - I am still not happy.

I have an American Express card also. I called American Express customer service to find out what their rules are. Amex only charges 2.7% for transactions in non-US dollars. I will definely be using my Amex card from now on.

[Sunil]

I to had problems with Citi on a paypal transaction. I did however comb through the literature. The change specifically says will be charged on purchases "made" outside the US. They cannot legally substitue headquartered or processed for the term made. If there is a lawyer reading these posts and you would be interested in looking to file a class action suit I am interested in being the first person to sign up. Few people know but less than half of "U.S." companies are headquartered in the U.S., is citi going to start charging a 3% fee on all transactions at Walmart? (not headquartered in the U.S.) How about when you buy a Toyota, Honda or basically any car but Ford (the last remaining U.S. company, and with their stake in Mazda I suppose even they could arguably be headquartered "outside the U.S.") So I'll reiterate, if you are a lawyer and want easy money, contact me and lets get this going. Also if you would be interested in joining a suit also contact me, if I can get enough people interested I'll look for a lawyer myself. Set up email address myspamguard08-citilawsuit@yahoo.com
for anyone who wants to contact me.

[J]

I had an issue with Citi that they charged me on a British Air ticket that originated in the U.S. and was charged in U.S. Dollars (and booked through their U.S. phone number). Citi claimed that "we have no idea what will show up as a foreign transaction until the end of the month" ... this seems very fishy to me, as well as absolutely sneaky and NON TRANSPARENT - if there is no way for a consumer to know up front that there is a foreign transaction taking place, how can a consumer make an informed decision?????

[Ann]

I purchased flea medication was charged 1%. I paid through paypal and the package was shipped from North Dakota. PayPay denies they are responsible. My credit card company, VISA, states the seller processed the payment through a foreign bank and the fee was charged. I had no idea that it was a foreign company. I will not order on line again. Keep your stuff. I would rather pay more locally. The consumer is continually being ripped off. Do not use your credit card, get cash from your bank. It is the only way to stop the insanity.

[Jason]

I was recently charged this fee as well and what stands out to me is isn't this a violation of free trade? Citibank (in my case) or any other credit card company is essentially disadvantaging foreign companies or foreign-based companies based on this charge and in esssence disrupting free markets. Really, I think this is a distrubing trend that should be subject to a class action lawsuit.

[Nikky]

Bank of America is def charging the fee. I bought some stuff on ebay using Paypal and I get slapped with a 3% transaction fee. Lord, they keep finding new ways to rip the small people off.

[James D'Arrigo]

Same story, Virgin Airlines-Booked tickets in Henderson NV, cost quoted in US dollars, billed in US dollars, paid by Prudential credit card in the US, and on my statement in US dollars. I find it sneaky that they also did not put Prudential fee next to the amount on the statement. It was made to look like it came from Virgin but no it was a $50.33 foreign transaction fee billed to me by Prudential. It took four phone calls to Prudential to get it removed but I've just made more flight purchases and car hire this week, so I'm screwed again. Sent two emails to Virgin as I cannot find any disclosure that these fees would inccur. Called my local news station, contacted consumer affairs, contact VISA as we were told it was there fault,sent it out on Twitter, and going to contact senators and congressmen. This is a crime!!!!!
I liked the guy who made a video for Youtube about the Airlines that damaged his guitar. I think me and my wife are going to put a video together about Prudential's 3%. I want to give my 3% of disgust back to them.

[Grunt]

I had the same experience with Citi Card and MakeMYTrip. I am waiting on a customer service written email from Citi to explain the charges when the charge was posted in USD and merchant's address is in NY.

[birgit]

Trying to get to the bottom of this issue, I asked my B of A "customer service agent" to give me details of the so-called foreign transaction. All I wanted to know was what the amount in the said foreign currency had been? I got NO answer. I hope someone can stop this scam!

[Donna]

I just discovered this new rip off charge on my Citi card. I bought a product online from a company called Pawsie's Natural Pet Products. Right on their website (www.pawsies.com) they list a US office location, they charge me in USD and the charge is posted to my account in USD. But Citi said the company billed them through a Canadian bank and therefor I get hit with the fee. I asked her how would I know a company uses a foreign bank if they list a USA address - no answer for this.

[Laura]

I was shocked when I discovered that MasterCard charged a 3% "foreing transaction fee" for a purchase of an ELAL flight ticket NY-Tel Aviv-NY, that I purchased over the website, in the US. The ticket was purchased in dollar currency, the invoice I received from ELAL is in dollar amount ($1423,40) and it clearly states that there will be no additional taxes nor monetary supmenents, so I was confident that would be it (already an expensive ticket, right?) Of course ELAL is not responsible ot this awful charge, but at least they could make us aware that if we purchased a ticket over the website we may be incurring in a 3% "foreign transaction fee" if we use V/MC. (I don't know about AmEx, someone told me I could have avoided the charged if I used an AmEx card).
There was no way for me to anticipate this transaction fee. It was very clear to me that the transaction was processed in the US (US currency, US invoice, English-language website). It seems that ELAL processes website transactions at their Ben Gurion Airport, Israel, and this is why the credit card considered it to be a "foreign transaction". Not that I purchased over the website -that doesn't matter. For the credit card, it is the same as if I was in Israel and I purchased the ticket over a counter there. Funny, ha?
I called the credit card company. I complained and said I would dispute the charge, and the customer service representative screamed to me (Yes, she screamed) No! You cannot dispute this charge!!!!
I will, of course. F...ing credit cards!