Update on use of debit, credit and ATM cards

[Bill123]

Everyone knows that on your international trips that the use of ATM cards is much better than using traveler's checks or getting cash in a foreign bank or getting foreign currency here before you leave. And much much better than exchanging cash at hotels or money exchange shops. Because bank card companies do such a high volume of currency deals, they get the low wholesale or interbank rate reserved for only the largest customers. You might save up to $25 on a $500 deal just by using your card, due to these great exchange rates you get.

But that doesn't mean you aren't having to pay for the privilege of using your cards.

First, considering purchases, whether you are using debit cards or credit cards, the Master Card and Visa organizations charge 1% of the transaction. And now, many banks and other credit card issuers that actually issue the cards are adding a 2% fee, or more.

For instance, Wells Fargo charges 2% on both debit card and credit card purchases.

Bank of America and Bank One does the same.

Citibank charges 2% on credit card purchases, but nothing on debit card purchases.

Chase is 2% on credit cards, and 2 1/2% on debit cards.

Providian charges 2%, but only on their platinum credit cards.

Capital One and MBNA and USAA charges no additional fee on their credit cards.

These rates can change at any time of course. Check www.bankrate.com for rates at other banks and credit card issuers.

So, you will pay around a 3% fee overall in many cases to charge goods and services on your debit and credit cards in foreign countries. In other words, you will get the great exchange rate, but the fees will take away some of the benefits of that great rate.

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Now, as far as using your cards in ATM machines for cash, you will pay flat fees of $1.50 to $3.00 for each machine use. Bank of America waives its fee $3 fee if you use an ATM that is in their Global ATM Alliance network. But you will avoid the above 3% charges if you are just using your debit card or plain ol' ATM card to get money at an ATM.

But, and here's something I wasn't able to figure out...I am wondering if the base exchange rate for your small ATM transactions might be subject to HIGHER rates than what you get from purchases. In other words, maybe Visa and Master Card get better exchange rates for purchases that you do for withdrawals. And if so, it would be interesting to see if, even after the 3% fees, that purchases might still be cheaper than cash withdrawals! If anyone has been down there and made both purchases and cash withdrawals, can you report on which was the better avenue?

And a hint. Not only do I avoid purchases with cards, and only use debit or plain ol' ATM cards for cash at ATM's, but with my credit union there is no tranaction fee of any card as long as I don't do it more than 5 times in a month.

If I absolutely have to use a card to make a purchase, I use my credit union debit card, since they don't charge a 2% for its use. I am sure I am still paying the 1% fee to Master Card though. But again, as I said above, I am wondering if the base exchange rate is better for purchases than for cash withdrawals.

Also, take out as much cash as you can each time you use it.

[Brighton]

**This relates to Bill's discussion above and is from today's NYT. Looks like MBNA is a good card to have; might be worth sending in the next pre-approved application that gets mailed to your dog**

PRACTICAL TRAVELER
New Card Fees in Effect Abroad
By SUSAN STELLIN


RAVELERS headed abroad have long assumed that when paying for hotel rooms, rental cars or pasta dinners, they could get the best foreign exchange rate by using a credit card.

That is still generally true, but often-hidden fees that credit card issuers now charge customers when converting foreign currency into dollars have made paying with plastic less advantageous than before.

Over the last few years, it has become common for banks that issue credit cards to charge a 2 percent fee on purchases made in foreign currencies; that is in addition to the 1 percent Visa and MasterCard have charged since the 1980's for converting foreign currency.

These so-called "foreign currency conversion fees" are generally not listed on customers' bills, sparking complaints from consumers as word has spread about the practice; at least two lawsuits are now working their way through the courts.

Dennis Stewart, a lawyer who is trying one of the cases in Oakland, Calif., said the fees violate several laws, including the federal Truth in Lending Act, which governs what information must be disclosed to consumers about credit cards.

"That statute requires that finance charges and transaction charges have to be disclosed in solicitations and in cardholder billing statements," said Mr. Stewart, who works for the law firm Milberg Weiss in San Diego. This charge, he added, has not typically been disclosed in that manner.

The suit in Oakland, brought by an individual, seeks to require the card issuers to disclose the fee on solicitations and billing statements, and to refund fees paid in the last four years by California customers. Mr. Stewart expects the case to continue at least through the summer.

Instead of listing these charges on customers' bills, most card issuers mention the fee only in the fine print of the cardholder agreements they send customers from time to time — the small brochures most people toss out or file away without taking time to read through all the legal jargon.

So consumers who have not read the fine print would not necessarily notice any additional fee had been applied to purchases made abroad; banks generally just list the price in the foreign currency and the final dollar amount charged on the bill.

"You don't know that what happened was that there was an exchange rate applied, plus the currency conversion charge," Mr. Stewart said.

As a result, travelers headed abroad are advised to check with their credit card issuer to find out whether it charges any currency conversion fees — and if possible, use a card that either assesses a lower fee or none at all.

Fees Are Fairly Standard

But most of the top consumer card issuers now charge a fairly standard 2 percent fee, in addition to the 1 percent fee levied by Visa and MasterCard. These include, among others, Citibank, First USA, Chase, Providian Financial Corporation and Bank of America.

Colin Baptie, a spokesman for Visa International, said it charges card issuers a 1 percent fee for processing the transaction through computer networks, and that banks can choose to pass this fee on to customers (most do). Bank representatives generally attributed the 2 percent fees they charge to expenses associated with foreign transactions, such as allowing customers abroad to call collect if they have a problem.

The fact that so many banks have settled on a similar fee is at issue in a class-action lawsuit Mr. Stewart has also brought against the banks and the Visa and MasterCard networks; he is trying this case in federal court in New York. In addition to disclosure violations, that suit also alleges price fixing and collusion among the banks and the credit card networks.

Among the major credit card issuers, MBNA is one of the few companies that have not adopted the additional 2 percent foreign currency charge. "We pass along Visa or MasterCard's fee but we don't add any fees of our own," said Jim Donahue, a spokesman for MBNA, which primarily issues affinity credit cards on behalf of universities, professional organizations and other groups. Similarly, Capital One passes along to its customers only the 1 percent fee Visa and MasterCard charge and does not tack on its own fee.

Playing the Percentages

For travelers who spend a lot abroad or are looking to save a few dollars, paying with an American Express or Diners Club card is another option. American Express charges a 2 percent foreign currency conversion fee, which a spokeswoman, Judy Tenzer, said was an increase from the 1 percent fee levied until 1999. Diners Club also charges a 2 percent currency conversion fee.

Another motive for shopping around may be choosing a credit card company that itemizes or at least displays a total currency conversion charge on its bills.

Chase, Bank of America and U.S. Bank are three credit card issuers that do list their foreign currency charges on bills, so customers can see how much they have been charged. But most banks still simply subtract these fees without itemizing them on the bill.

"I have my current Visa bill in front of me and there's no fee specified for conversion charges," said Matt Brodlie, a senior vice president at Miramax Films in Los Angeles, who says that he travels abroad about 10 times a year, primarily for work. He generally uses a Visa card issued by First USA in conjunction with United Airlines's Mileage Plus program, and said he remembers receiving a notice earlier this year about the currency conversion charge. (First USA did not respond to several calls seeking comment.)

In fact, First USA started charging the conversion fee on its Mileage Plus Visa card only this spring, as I discovered when I used the card overseas recently, and was the last credit card affiliated with a frequent flier program to do so.

Travelers who use credit cards affiliated with airline mileage programs can either resign themselves to paying the fee or switch to a card that does not accrue frequent-flier miles. United's First USA Visa card, American's Citi AAdvantage card, Northwest's U.S. Bank Visa card and US Airways' Bank of America Visa card all charge a 3 percent fee for foreign currency conversion, while Delta's American Express card levies a 2 percent charge.

Despite these fees, paying with a credit card is still typically a better option for travelers making purchases abroad than using traveler's checks or exchanging cash. In some cases, withdrawing cash in the local currency from an A.T.M. might provide a slight savings, but it depends on the fees charged by your bank and the local bank — and carrying a lot of cash has its own drawbacks.

David Robertson, publisher of a newsletter about consumer payment systems called The Nilson Report, said that for most people the difference in service charges between using a credit card and withdrawing cash in the local currency from an A.T.M. is not that great. And, he said, if you make purchases abroad with a credit card, you can more easily dispute transactions later on.

SUSAN STELLIN writes frequently for The Times.

[Kent]

Compass bank based in Atlanta georgia will refund any ATM fees assessed by any bank to any of there account customers using any machine world wide. All you need to to is collect all of your receipts and mail them to compass bank and they will cut you a check for the additional fees. IT JUST MAKE CENTS!

[Bill123]

That is nuts. First of all, how many of us do our banking at Compass Bank? Secondly, instead of saving up receipts and going thru all that trouble, why not just get an ATM card that doesn't charge any fees in the first place? Such as the ones issued by many credit unions.

[Bryan]

Do you live in Atlanta Kent?

[marwikiv]

Originally Posted by Bill123

That is nuts. First of all, how many of us do our banking at Compass Bank? Secondly, instead of saving up receipts and going thru all that trouble, why not just get an ATM card that doesn't charge any fees in the first place? Such as the ones issued by many credit unions.

I agree. You must apply for an ATM. It is much cost inexpensive and less hassle.