Posts Tagged foreign transaction fees

A word of warning to Citibank credit card holders: your no-tax internet shopping days may be over.  If recent reports are correct, Citibank is now charging foreign transaction fees to customers who use their cards over the web to order from international companies.

If you’re in the US and order shirts from a Hong Kong supplier, for instance, you’ll get slapped an automatic 3% foreign transaction fee, even when you’re billed in dollars.  Do you host your websites with a UK-based hosting company?  Your monthly hosting bills will now come with an additional 3% tacked on to it.  If you’re a Citi card holder, better check the address of the merchant you’re buying from before making any purchases online.  Otherwise, you could suffer through considerable charges.

Since many people shop online almost as much as they do in physical stores, that means a whole lot of credit card holders will end up affected by this change.  Can you imagine how much money the credit card issuer stands to make on this?

While I totally understand Citibank trying to recover their losses during these trying times, this is really a bad way of going about it.  I, for one, use my Citi card for a lot of recurring business-related international bills and have already begun using a different payment method.  Will Citibank make more money if I actually stop using their card, as well as thousands of other people who don’t appreciate a three percent tax?  I doubt they will.

Using your credit card abroad can prove a costly affair.  If you don’t watch your card’s billing mindfully, you could be paying through the nose for charges and fees as a result of overseas use.

Dynamic Currency Conversion

Anytime a merchant asks you if you would like the charges to your credit card to be made “in your home currency,” they’re talking about a Dynamic Currency Conversion.  Instead of letting the credit card companies handle the conversion, the merchant does it on their end.

While it might sound like a smart idea (since you can see your charges on the currency your account is going to billed in), this offer is really nothing more than a scam.  The conversion rate the merchant uses on these types of purchases are so ridiculously skewed (read: higher than actual), you’re literally paying extra money for nothing.  Always say an emphatic “NO” when you’re asked.

Foreign Transaction Fees

While some merchants will try to convince you that charging in your native currency will remove the Foreign Transaction Fees usually levied by credit card companies, they’re really guessing at best.  Some credit card issuers won’t charge the fees, while others will continue to do so.  It all depends on your credit cards’ terms, not the word of some merchant who stands to eke out a little more profit from the deal if you agree.

Legality

As much as we would like to declare these types of setup as fraudulent, they’re actually legal, as long as you agree once you’re asked.  Always disagree to being charged with an automatic currency conversion - there’s absolutely zero benefits for you when you let them.