Foreign currency fees are just another way that credit card companies abuse their customers in order to make a profit. John Carter recently discovered that both his Visa and MasterCard were charging foreign currency fees. Now, he's concerned that these fees will have a serious impact on his business.
In August, John visited Canada. While there, he used his credit card to make a purchase. What he didn't realize was that he was being charged a 3% foreign currency fee for using that credit card. In fact, he didn't recognize that he had been charged this fee until he made a different business purchase from Europe. When he received the bill, he says he was shocked to see the foreign currency fee on it.
"They can't be losing money on the exchange rate," John says. "The banks control the exchange rate. So they're just looking for another fee to tack on so they can make more money."
"I run a small business," John says. "Sometimes I have international business purchases. Lots of small businesses do. This sort of thing hampers commerce. It also increases my customers' fees. Now I have to ask if I can still be competitive in business if I have to pass on these fees to my customers."
These fees are charged on many credit cards, even though the credit card company has done nothing to earn the money. Basically, the credit card companies are charging these fees for converting foreign currency into U.S. dollars.
For example, if a person visits Canada and pays for a meal with his credit card, the meal is paid for in Canadian dollars. However, the charge appears on the credit card statement in U.S. dollars. Credit card companies are charging fees for making this conversion.
"These fees were charged on both my Visa and my MasterCard," John says. "I'm alarmed that they can charge these fees. After all, the credit cards are owned by the banks. I'm sure they don't lose anything in the exchange rate."
Joe Ridout, Consumer Services Manager with Consumer Action, says that the foreign currency fee is deceptive. "Not every company breaks it out." This means that rather than showing up as a separate fee, the cost is added to the purchase price. So, if that Canadian meal cost $100 in U.S. funds, and there was a $3 fee, the price on the statement would show up as $103 for the meal. Most people wouldn't even notice the price difference. They would just assume it was part of the exchange rate.
"It's basically a junk fee added to a bill," says Joe. "Credit card companies have their own vision of what is ethical."
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If you have been charged a foreign currency fee, there's probably not much you can do. Check your card holder agreement to make sure that the foreign currency fee is included in the fine print. If it is, you can try to appeal the fee, but the issuer is under no obligation to waive it. If you do a lot of foreign business, it may be worthwhile to speak to the retention office at your card issuer and let them know you'll take your business elsewhere if they do not remove foreign currency fees. However, only do this if you are serious about changing credit cards.
"It doesn't seem right," says John. "Why should they charge the additional fee? It's just another fee that they can make money off. This practice should be illegal."