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

[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!

[Laura]

After reading all these posts, I decided that I will copy them and will attached them to the Letter of Complaint that I will write to CitiCard (the credit card bank that issued the 3% foreign transaction fee explained in the above post). I will also send complaints to Better Business Bureau, to Consumer Affairs. Perhaps someone can start a Class Action!

[Jane Doe]

I just bought a ticket on Orbitz in USD and was charged a 3% transaction fee because part of the flight was to Canada, this is outrageous and the banks are distgusting for imposing these fees

[Maria]

ATTENTION CITBANK CREDIT CARD HOLDERS: COMPLAIN to Citibank to have them REMOVE the "Foreign Transaction FEE" with regards to British Airways online purchases.
I was shocked by a "Foreign Transaction FEE" made to my account 3 days after I booked airtravel through British Airways AMERICAN BASED website. My ticket was purchased and paid for in USD and processed through British Airways Jacksonville office. This money grab by Citicards needs to be stopped...and can be if we all complain enough! I spoke with a Citi supervisor and complained and they removed the charge. I explained that British Airways emailed me more paperworking proving that this was an American based transaction...NOT a FOREIGN TRANSACTION. They asked that I forward it to them, but meanwhile would remove the Foreign Transaction Fee. This is an EASY FIX for the future buying of airfare tickets online...simply use AMERICAN EXPRESS! CitiCards will NOT like losing our business.

[Art S.]

I dropped Citibank's AAdvantage card after 24 years for this reason. I now use CapitalOne Visa. I don't know why everyone doesn't. And the banks wonder why congress passed laws last year. Congress has to pass more laws about this kind of abuse and make it clear that if banks continue this nonsense, there will be so many laws that the banks will beg for mercy.

[Eleanor]

Here is my example -
Bought an airline ticket on British Airways US website, quoted in US$ and billed in US$, using my Target National Bank Visa card.
Bill arrives, complete with 'Finance charge' of $95 (3%). Called company relations, got put through to 2 different supervisors; both, in different ways, claimed that the 3% was a charge enforced by Visa International and there was nothing they could do. From other postings on the web I believe this is simply untrue; at least 2% of it is the bank's own surcharge.
This charge annoys me twofold : (a) they are not doing anything any different with this transaction than any other dollar transaction, and (b) they are actually charging a percentage of the dollar amount for doing nothing (a real cash cow on airline tickets). I asked how a consumer is meant to know if a company's bank is located outside the USA and the response was that "it is up to the consumer to perform due diligence". What ?!?
An amusing note to end on - when you call Target National Bank customer services you are automatically routed to ..... you've guessed it, that well-know US location - India. Made me smile.

[DD]

I was charged the foreign transaction fee for product I ordered that is both manufactured and sold in the US. The explanantion is that the merchant that processed the charge is located in England. I called Citi and they are reversing the charge. I assume that any item ordered will have the chance of having this fee added. So watch your CC statements and phone to have the charge reversed. Alternative is to use your Bank account or find a CC that will not charge this fee.

[Milvain]

I just noticed a foreign transaction fee on my B of A credit card statement pursuant to a Paypal purchase from a German merchant. A B of A supervisor giving his name as "Jason" said that the fee was "imposed by Visa and MasterCard, so there's nothing we can do about it". Clearly the latter statement is a lie, given that Capitol One has chosen to absorb the fee. These banks are truly greed and shamelessness embodied.

[Ramu]

I had a similar experience. 3% foreign transaction fee on my USD purchase on britishairways.com. I called Citibank first and they asked me to talk to the airline. I talked to the airline - they say it is the bank that charges it and they have nothing to do with it. When I found this post, I called Citibank again and was told that they can't do anything about. I talked to the supervisor who was trying to talk me into accepting the charge. I gave them 2 options - either waive the fee or close the account. The supervisor talked to her manager and they waived the fee as a one time exception.

In the future, I will be careful to check with the airline/company you are purchasing the ticket with.
But the irony is - I called British Airways just now to verify if they process their online transactions as a foreign merchant. They say they don't!

Somebody is not being transparent here.

[Kim Estes]

We recently travelled to Canada and used our B of A credit card. We knew about the 3% charge, and were willing to accept the charge for the convenience of using the card. What I did not know is that B of A has increased our APR to 34.5% for these transactions, on top of the fees they charged. This is a temporary increase, for these charges only. I am not sure I understand how they even came up with this rate. Our rate was 11.99%. I am in the process of removing our accounts which are billed monthly to this card and our relationship with B of A is over. I have been a cardholder of MBNA America since 1994, which has been acquired by B of A. Sadly, I am unable to close this account, since it is my longest standing credit, however I will no longer use it. We plan to travel to Norway in the summer, and I think we will opt for good old fashioned travellers checks!

[Matthew]

I had a similar experience with booking on the British Airways US site. Everything was quoted and billed in USD. Nowhere on the site mentioned a possible 3% finance charge. Then my debit card got charged a 3% foreign transaction fee. I called BA customer service and complained about the charged. The representative told me to write a formal email and request a refund. She even admitted that most customers don't even notice it on the bill. What a fluke!

[Sara]

The Sears Gold Master Card charged me 3% Foreign transaction fee for an order I paid via Paypal. When I called them to complain about the charge, the customer rep just yelled at me and said the 3% charge has always been there. Whenever you ordered something from an international website, you have to pay the 3%. This fee is a hidden charge. How many people out there are aware of this? Very Ridiculous. I'm going to cancel this card.

[Margaret Case]

I was charged by BOFA for buying a Delta airlines ticket from the www.delta.com website from a computer in the United Arab Emirates ( November 2009). Evidently, they track TCPID address; there was no currency conversion and is a US airline: in short, a US Company in US dollars! This is ridiculous and nothing more than a tax on online business. I am willing to join any legal suit against them on this issue.

[Margaret Case]

Who is trying to stop this and how can I help?

[Margaret Case]

FYI: Evidenltly Capital One does not have such a fee.

[lily]

just got 3% charge on my citi master card. purchased two hand bags made by an Italy company through their USA website. Paid in $$ and products shipped out from NYC. the agent kept saying they paid in foreign currency. I asked him to show me the document. he said there is no such document. holly cow..