While credit card companies do not allow
merchants to tack on a fee when customers use
a card instead of cash (see Undercurrent, January, 1999), some traveling divers using
credit cards abroad may get whacked with a
surcharge from the bank issuing the card. In the last few months, First
USA and Citibank have begun tacking on a 2% fee for all foreign VISA
and Mastercard charges. First Cards, which are also issued by First USA,
will tack on 3%, and this 3% rate will also apply to cards from American
Airlines and United that accrue miles. American Express and
Diner’s Club charge 1%.
What’s a traveler to do? Consumer Reports Travel Letter says “it’s still a
good idea to charge your purchase overseas rather than exchange
currency or traveler’s checks, because the exchange rate is far better.
Credit card companies typically grant consumers the same favorite rate
banks give each other for bulk transactions—essentially a daily wholesale
rate plus a 1% fee. By contrast, travelers can lose 5-10% of their
money when they convert their cash. But the new fees are beginning to
narrow the margin.”