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Beware of Using Your Credit Card Abroad?

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It's summer. And for some lucky Americans, this means going vacation to a far off land in hopes of relieving the stress of everyday life. In general, it is a very happy couple of months for the regular American family but it can also be an even happier time for credit card companies. This is because of the fact that credit card companies are making a killing off the money Americans spend on their foreign vacations through questionable fees. Imagine this situation. You and your family are in Paris, France on vacation. Your wife sees a lovely pair of shoes that she "must have" and so being the good husband that you are, you purchase the $300 pair of shoes using your credit card. Two weeks or so later, your credit card statement shows up and instead of you seeing a charge for $300 dollars, you statement shows a charge for $309. How did this happen' The answer is that you were charge 1% foreign currency-conversion fee by Visa or Master to convert your foreign-currency purchase into American dollars and were also charged an addition 2% foreign transaction fee by your credit card issuer.

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If you are form the U.S., when you make a purchase abroad with your credit card, your credit card issuer will convert the charge to U.S. dollars before it appears on your statement. Usually, this is done through the Visa or MasterCard networks, which charge a 1-percent foreign currency-conversion fee for converting your foreign-currency purchase into American dollars. According to Kristin Arnold, a writer for, this is a good deal since changing your money in almost any other manner will probably cost you a lot more.

What is unsettling, however, is the additional foreign transaction fee which your credit card issuer charges. This fee can range from 2-3%. According to Linda Sherry, the editorial director for Consumer Action in Washington, "Banks have been making a profit off their customers for a long time, while providing no service." In Agreement, Ed Perkins, a syndicated travel columnist and author of "Business Travel When It's Your Money," says that these fees are "pure gouging that credit card companies know they can get away with". Foreign transaction fees do not relate to any service that the credit card issuer provides but instead is buried deep in the fine print of the credit card agreement between the issuer and the customer. So in retrospect, while Visa or MasterCard may have done you a favor by converting your foreign-currency purchase into American dollars for a fee of 1%, your bank's additional charges were driven by pure greed. So what can you do to avoid these fees' The answer is to do your research. Currently there is no standard rate at which all banks and corporations charge, so you could possibly find a card that does not add on any additional fees for overseas purchases. For example Bank of America, Citibank, MBNA and JP Morgan Chase all charge 2 percent on overseas purchases while Household Credit Services, Providian Financial Corp and Capital One do not.

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Another way that one can protect themselves from being overcharged is to know and keep up with the latest currency exchange rates. Visiting currency conversion sites like

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