The blog post we did last summer entitled “Beware of Credit Card Foreign Transaction Fee Fever” has generated quite a bit of reader commentary, with many of you sharing negative experiences associated with this topic.

The bad news is, it doesn’t seem that these fees are going to go away any time soon. The CARD act, which placed limitations on a significant number of different fees charged by credit card providers, unfortunately did nothing to limit foreign transaction or currency conversion fees. 

The question is, why didn’t the CARD act put a cap on these fees? One possible reason is that credit card holders who do alot of business or personal travel are generally a more affluent group of consumers, therefore less likely to be significantly concerned about the fees.  These fees, which can consist of up to 3 percent of the amount of your “foreign” purchase placed with with a credit or debit card, are one of the few unregulated revenue streams left for the credit card companies, and can add up to millions of dollars in profits annually.

The scary thing is that consumers are seeing these fees more and more simply from doing their shopping for goods or services on the internet, and are often caught unaware that their purchase is considered a “foreign transaction”. And for every cardholder that actually notices the fee and tries to complain or do something about it, there are likely hundreds more that either overlook the fee, or don’t have the time or a strong enough concern level to be bothered with pursuing any action with their card issuer.

So how do we do something about these fees? Given that most of us aren’t lawmakers and can’t draft a new bill curtailing these fees, the next best step might be to stop utilizing the credit cards that are charging them, as follows:

American Express: Charges 2.7% for foreign transactions, with some leniency given for certain high-use corporate customers.

Bank of America, Chase, Citibank, US Bank, Wells Fargo: Typically charges 3% for foreign transactions (in each of these cases, the total fee includes 1% which is charged by Visa/Mastercard along with 2% by the card issuer).

Discover: 2% total (but many overseas merchants do not take Discover)

USAA: 1% (note that this card is available only to members of the military and their immediate families)

If you want to avoid paying foreign transactions fees altogether, there are a few credit cards we found that currently do not charge fees for this service, namely the Capital One card and the Schwab Invest First Visa. It is also worth investigating through your local credit union whether the card that they offer may also have low or no fees for foreign transactions.

According to Ryan Schneider, the president of  Capital One’s credit card group, they do not plan to implement any fee for foreign transactions within the next year, and further adds that “We made the strategic call that we were pleased to cover the costs for customers because we like that customer segment and we think it will generate customer loyalty.”

Now, we aren’t necessarily suggesting you cancel any of your cards that are in the list above, but that perhaps you add another card to your “arsenal” to use for any foreign travel or purchases, especially for those of you who do this frequently.

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