A lot of things can trigger the post-vacation blues: A groaning inbox. Sand in your shoes. Busted memory card ate your photos.
But the worst surprise is lurking in your credit card bill. Not only did you drop $187 at the Hard Rock Cafe, but your bank is charging you an extra $5.61 because it was in Aruba rather than Seattle. And they’re tacking a similar fee, up to 3%, onto every dollar you spent abroad.
Worse yet, maybe you never even set foot outside the country or charged anything in Euros or Aruban Florins. But there it is in black and white: an International Service Fee.
Travel and seizure
Visa (V) and Mastercard (MA) charge 1% on international transactions. Banks then typically add their own fee on top of that. JP Morgan Chase (JPM), for example, charges customers 2% in addition to Visa/Mastercard’s 1%. American Express (AXP), which issues its own cards, charges 2.7%.
Notice I said “international transactions,” not “foreign exchange fees.” It used to be that you only got hit with these fees when there was actual currency conversion involved. Not any more.
Now you can get slapped with the fee for:
* Buying a ticket in US dollars, through a US web site, from an international airline.
* Shopping online, when a foreign bank is somehow involved in the transaction in a way that is completely opaque to the customer.
* Going to Puerto Rico, which is, last I checked, part of the United States.
* Eating at the Benihana in Minneapolis.
Okay, the last one doesn’t incur a fee. Yet. “There’s this maddening randomness about it,” says Christopher Elliott, a consumer advocate who has written extensively about foreign transaction fees. “Even if the purchase was made in the United States with an American company in American dollars, you could still have this fee.”
If you think you’ve been slapped with a bogus international fee, Elliott recommends calling your card issuer immediately to dispute it. If your card is issued by a national bank such as Citibank (C), Chase, or Bank of America (BAC), you can escalate the problem to the bank’s federal regulator by filing a complaint at HelpWithMyBank.gov.
You don’t have to dispute a fee if you’re not charged one in the first place.
The good news: A few banks let you transact all day in the country of your choice without taking an extra cut.
The most well-known is Capital One (COF), which charges no international fees (not even the 1% Visa/MC fee) on any of its credit or debit cards. Capital One’s cards require a high FICO score to qualify, and they have a reputation for being real sticklers about fraud: if you don’t call in advance to tell them where you’re traveling (this is a good idea in any case), your card will be declined once you arrive in Aruba, Jamaica, or Benihana.
For debit card fans, the traveler’s best friend is the High Yield Investor Checking account at Charles Schwab (SCHW). You will have to also hold a brokerage account with Schwab, but neither the brokerage nor the checking account has a minimum balance requirement or maintenance fees. The debit card has no ATM fees and no international fees anywhere in the world, and the account even pays a little interest.
Finally, “there are a bunch of credit unions that have cards that are, if not fee-free, at least relatively free of these charges,” says Elliott. Many credit unions and community banks simply pass on the 1% Visa/MC charge but don’t pile on with their own fees. A few waive the charge completely. Keep apprised of the latest deals at the FlyerGuide wiki.
Keeping it in perspective
International fees suck. But keep a couple of things in mind:
* They’re better than exchange counter fees.
If you change money at a bank, airport counter, or merchant, you’ll generally get a lousy exchange rate that is even worse than the 3% you’ll pay on a credit card transaction. And if a merchant ever offers to ring up a charge in US dollars, forget it: you’re getting a terrible exchange rate and will probably pay the international fee anyway.
* Don’t forget rewards.
If you have a card that offers 1% in rewards and charges 1% in international fees, you’re kind of breaking even: there’s no need to run out and get a travel card with no rewards and no fee.