NEW YORK (sbup) — Credit card companies finally seem to be genuinely interested in cutting fees these days. The latest item on the hit list is the foreign exchange fees that issuers place on purchases made overseas, which can add up to 3% of every transaction.
While 90% of bank debit cards and 60% of credit cards have foreign exchange fees, according to a study this year by the Pew Trusts, the fees aren’t uniform.
Those with a Bank of America MasterCard, for example pay a 3% fee – 1% to MasterCard (Stock Quote: MA) and 2% to Bank of America (Stock Quote: BAC).
On its web site, Citi (Stock Quote: C) explains how and why it charges foreign exchange fees on its “Simplicity” credit card:
“Transaction Fee for Foreign Purchases: The pricing information table shows the amount of this fee (3% of each purchase transaction in U.S. dollars), which is a percentage of the U.S. dollar amount of the purchase. We add this fee for each purchase made outside the U.S., whether made in U.S. dollars or in a foreign currency."
American Express (Stock Quote: AXP) doesn’t have any “add-on” fees, but it does charge customers a flat 2.7% foreign exchange fee.
For select customers, issuers are cutting those foreign exchange fees. In Amex’s case, that means Platinum Card and Centurion Card customers are in effect getting a full 2.7% price break on foreign purchases. The fee cut goes into effect in March 2011, Amex reports.
JP Morgan Chase (Stock Quote: JPM) has followed suit, issuing a fee cut for customers using its British Airways Visa (Stock Quote: V) Signature “Thank You” Premiere and Prestige Cards.
The New York Times reported that card companies are only curbing foreign currency exchange fees for high-end customers, and are dragging their feet on reducing them for all customers, who may be asked to pay higher annual fees to use their cards abroad.
In the meantime, the all-around best card for customers traveling overseas seems to be Capital One (Stock Quote: COF), which places no foreign exchange fees on any of its cards.
While card issuers say these charges fund the costs of fraud prevention and volatile currency exchange services, it’s the travelers who bear the brunt of those charges.
But critics say that card companies slap overseas travelers for no discernable reason other than to fatten up their bottom lines. With more issuers rolling back those fees, they may have more evidence to back up that claim.
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