Foreign transaction fees sting credit card users

05.13.09
By Sarah Beldo

Thinking about using your credit card to make purchases on an upcoming trip abroad?

If so, you may want to brace yourself for the possibility of steeper charges. According to a report in the Wall Street Journal, a number of credit card issuers have changed the terms on how they caculate foreign transaction fees.

For example, Discover Financial Services customers face a new 2 percent charge for foreign purchases from this month onwards. It follows in the footsteps of American Express, according to the newspaper, which hiked its fees from 2 percent to 2.7 percent last year.

Meanwhile, Bank of America and Citigroup cardholders have recently been notified that foreign transaction fees will also apply to anything bought abroad using U.S. dollars.

This change makes it harder for shoppers to dodge extra charges by seeking out overseas merchants that typically charge customers in American currency. Even online shoppers buying from overseas retailers are affected, the Journal states.

Increasing fees has been one of the major tactics credit card companies, citing a challenging economic climate, have been using to recoup lost profits.

Recently, the Center for Responsible Lending noted that two of the top eight credit card issuers have hiked fees for cash advances and balance transfers to 4 percent, a move the group calls "unprecedented."

Meanwhile, many consumers report banks are also raising their interest rates - even if they have never been late with a payment - or cutting their credit limits.

The first action can cause someone who carries a balance to fall deeper into debt, while the second can have a negative effect on your credit score.

Consumer credit expert John Ulzheimer told USA Today that actions such as these can lead to further problems for cardholders.

"Now, other issuers think you're high risk, and they may start doing nasty things to you, and it starts snowballing," he explained.

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Watch out for foreign transaction fees.