Overseas Credit Card Charges

Many travelers now rely on credit cards to pay for overseas travel and purchases. For many consumers, credit cards are easier to keep up with than traveler's checks and they're almost universally accepted now.

Most credit card issuers charge fees for overseas transactions. American Express, for example, adds 2.7 percent to every overseas transaction (up from 2 percent last summer), while Bank of America, Chase, Citibank and HSBC tack on 3 percent, according to Curtis Arnold, who runs CardRatings.com, a Web site that tracks credit card fees.

Also, you may find surprising that purchases of products from Web sites that are based outside the United States may be subject to this fee.

Virtually every credit card assesses an international transaction fee for purchases done outside the 50 states, and that could even include U.S. territories like Puerto Rico and the U.S. Virgin Islands. Visa and MasterCard charge a 1% processing fee and most card-issuing banks add additional fees as well (on top of the 1% fee levied by MasterCard/Visa).

This fee is generally a percentage of the U.S. dollar value of the transaction. So, even if you paid 100 Euros for a meal that was actually $125 (U.S. dollars), the foreign transaction fees will be assessed on the $125 amount.

There are ways around this. Discover, for example, charges no fees, but is not as widely accepted abroad as Visa, MasterCard and American Express. In December, Charles Schwab Bank, a corporate sibling of the brokerage house, introduced a credit card that charges no transaction fees and puts 2 percent cash back into a brokerage account. Capital One charges no fees of its own and even eats the Visa charge.

A January 2009 survey of credit card issuers revealed the following foreign transaction fees:

• American Express - 2.7%
• Bank of America - 3%
• Chase - 3%
• Citi Bank - 3%
• HSBC - 3%
• Washington Mutual - 1%
• Wells Fargo - 3%
• Capital One - No Foreign Transaction Fee
• Discover - No fees. Accepted in China, the Carribean, Central America, Mexico and certain parts of Europe. Note: Discover is adding a 2% fee on May 1, 2009.

Despite fee hikes in the past year or so, credit cards are often still the most cost effective payment method for overseas travel, but you should consider fees when planning your trip and budget accordingly. For all credit cards, be sure to call your company before you leave the country and tell them specifically where you will be traveling. Otherwise, they may tag your purchases as fradulent and stop your card.