This Thanksgiving, my wife and I will be heading to London, England, to visit good friends of ours who are working there. Given the recent economic unrest, it seems pretty foolish for us to try to play any games involving exchanging money so we’ll try to convert as little as possible directly, instead we’ll resort to using credit cards as much as possible so we orphan (leave in pounds sterling) as little cash as necessary.

When it comes to using credit cards abroad though, it’s gotten a little more complicated than your classic “foreign transaction fees.” It turns out that in addition to the issuers and banks charging you a fee, some merchants will add a “Dynamic Currency Conversion” fee on top of everything else. That can be as high as five percent!

International Card Use Fees

After a little research, here are the three fees as best as I can decipher them:

Card Issuer	Foreign Currency Conversion Fee (%)	Issuer Fee (%)	Dynamic Currency Conversion (%)	Total Fee (%)
American Express	2%	0%	0%	2%
Bank of America	1%	2%	0-5%	3-8%
Bank One	1%	2%	0-5%	3-8%
Capital One	1%	-1%	0%	0%
Chase	1%	2%	0-5%	3-8%
Discover	0%	0%	0%	0%
First USA	1%	0%	0-5%	1-6%
MBNA	1%	2%	0-5%	3-8%
Providian	1%	1%	0-6%	2-8%
US Bank	1%	2%	0-5%	3-8%

• Foreign Transaction Fee: The foreign transaction fee refers to the fee that is charged by the payment processor (Visa, Mastercard, etc.) to handle the foreign exchange.
• Issuer Fee: The issuer fee refers to the fee that the bank charges to handle the transaction.
• Dynamic Currency Conversion: That’s the fee charged by the merchant for the acceptance of your card. This fee often times covers the transaction fees levied by international payment processors.

Example Use Case

Let’s say we have and Bank of America credit card and we go buy something at a pub in London. When we pay our tab, there are potentially three fees levied on top of our bill for goods and services. First, Visa, the card issuer, will charge us a 1% fee for handling the transaction. Then, Bank of America will want a piece of the action and charge their own 2% fee. Finally, the pub, in trying to recoup its own costs, tacks on a dynamic currency conversion fee on top of everything of 5% (let’s just say). That means your bill started at $20 USD and suddenly became $21.60 after fees, or 8% more.

Best International Card: A Capital One

The two best choices for international spending appears to be a Discover Card or a Capital One card. One interesting thing I’ve learned, again in doing research, is that Discover card, because it’s such a smaller network compared to Visa and Mastercard, simply isn’t widely accepted. It’s not as widely accepted here in the US either, so that’s not surprising.

To my knowledge, I’ve never had a Capital One card, so now’s as good a time as any to add one to the stable. The one that looks most appealing to me is their No Hassle Cash Rewards Credit Card - no annual fee, cash back (rather than points or miles), and they also have a 0% on purchases until October 2009. As an added bonus, you get 2% at gas stations and supermarkets. (The application process, including approval process, took about three minutes!)

If you’ve done a lot of international travel and have any recommendations, we’re all ears!

Big Ben here we come!

Did you know that there was an anti-trust case brought against the major credit card issuers regarding foreign transaction fees? For those who aren’t aware of foreign transaction fees, these are fees that some card issues add onto a credit card charge made in a foreign currency. This fee can range anywhere from 1-3%, though some issuers will absorb the fees. These fees are not the cost of converting the currency, which is likely absorbed in the exchange rate used by the credit card company. Well, today these foreign transaction fees are often broken out and detailed on the credit card bill itself (sometimes as a mere asterisk indicating a x% fee was levied for this foreign transaction, sometimes an actual dollar amount) but this wasn’t always the case. In the past, card issuers wouldn’t even mention a transaction fee was levied and buyers would merely see a poor exchange rate.

But the fee itself wasn’t the problem, plaintiffs claimed that the Visa and MasterCard networks, their member banks, and Diners Club conspired to set the fees and conceal them from the public by inflating their exchange rates (essentially hiding the fee in the rate). Which cards are included?

Visa- and MasterCard-branded credit cards (including charge cards) and debit/ATM cards (including stored value and payroll cards), and Diners Club-branded credit cards (including charge cards). The Visa-branded cards include Visa-, Interlink-, and Plus-branded credit and debit/ATM cards; the MasterCard-branded cards include MasterCard-, Cirrus-, and Maestro-branded credit and debit/ATM cards. The lawsuit includes purchases, cash advances, cash withdrawals, and internet transactions.

So, the defendants have now elected to settle and set aside $336M to pay for it all. If you wish to participate in the settlement, what you’ll need to do is choose one of three options. The option you choose will depend on your level of international travel and how much you’ve spent in the years between 1996 and 2006.

1. Refund Option 1: Request an Easy Refund of $25. This Option is recommended if you traveled outside of the U.S. for less than one week or had foreign transactions of less than $2,500 using your eligible cards during the 1996 to 2006 period. (Green Form); OR
2. Refund Option 2: Request a Total Estimation Refund based on typical spending during travel and your answers to a few questions about your own travel outside of the U.S. This Option is recommended if you traveled outside of the U.S. for more than one week or had foreign transactions of more than $2,500 using your eligible cards during the 1996 to 2006 period. Refunds will be a maximum of 1% of estimated foreign transactions. (Blue Form); OR
3. Refund Option 3: Request a refund based on information that you provide concerning your Annual Estimated foreign transactions during the 1996 to 2006 period. This Option is recommended if you had extensive foreign travel or foreign transactions and are willing to provide year-by-year information. Refunds will be a maximum of 1% to 3% of foreign transactions. This is the only Option you can use to get a refund for corporate card use. (Red Form)

I think I’ll probably do Option 1 or perhaps Option 2, since I’ve traveled internationally quite a bit to visit family in Taiwan and on vacations abroad. I have yet to review the claim form to see the level of rigor involved but it seems relatively straightforward.

The deadline to file this has been extended to May 30, 2008.

(Thanks Tim!)

Credit card companies are just like every other business. There are essentially three concepts to understand when dealing with a business, especially credit cards:

• They exist to make as much money as possible,
• They have relatively well documented rules and operating procedures,
• They’re willing to break #2 in pursuit of #1.

So, to that end, here are 7 unwritten and often forgotten credit card tricks or “secrets” (I hate the term “secrets” because how much of a secret can they be if I know it?) that may save you a few bucks someday. If you don’t learn a single secret or you have a secret of your own, please let me know! Secrets are better when you tell everyone!

1. Just ask: Lower interest, reduce or eliminate fees

This is truly the best tip of the bunch, hence the top billing, and everything else looks like chopped liver compared to this bit (despite how popularized it’s been of late). The credit business is extremely competitive, take advantage of it by asking for what you want. If you made a late payment and were assessed a late payment fee, call them up and request that they take it off. If your interest rate is too high, call them up and request that they lower it. If they decline, simply tell them that you want to cancel the card or that you’ll take advantage of a new offer that you just received in the mail. They make so much money from you when you spend (they charge the merchants a processing fee) that the piddly late fee pales in comparison to the riches they will reap by keeping you as a customer. If they don’t budge, punish them by taking your business elsewhere.

2. Roll credit limits of the same issuer onto fewer cards

This is a popular one with 0% balance transfer junkies because Citi has a “not so often spoken” rule of limiting a cardholder to at most three lines of credit (without regard to the actual dollar limit). This stinks for balance transfer arbitragers because they want to keep rolling that 0% balance from card to card to card and that gets dicey if they can only have three. One way of getting around this rule is to ask that you roll the credit limits of one of the cards into another one of the cards. They are generally willing to do this because the alternative is that you cancel the card and they lose the business. Since they were willing to give you the total limit in the first place, putting it on two cards instead of three hardly makes a difference to them. This has an added benefit for you from a credit score perspective - you reduce the number of open lines of credit while keeping your credit utilization and total credit limit the same. Double win!

3. Request an increase to the credit limit without a credit pull

I’ve written about how you can request a credit limit increase in the past and not get a credit pull but I wanted to repeat it in a post like this because it’s something not a lot of folks know. What you basically do is, through your online account management portal, go through the normal process of requesting a credit limit or line of credit increase. Sometimes, based on how long you’ve been with the issuer and your credit worthiness, they may offer you an increase on the spot without a credit inquiry. Do not bother trying this within the first six months or first year with the card, they generally won’t offer this without a credit pull so you’d just be wasting your time.

4. Capital One & Discover don’t have a foreign transaction fee charge

When you purchase something overseas, your credit card will often charge you a foreign transaction fee to handle the foreign exchange process for you. In fact, part of that fee is imposed by Visa and MasterCard itself, so any Visa and MasterCard that charges you less than 1% is actually eating the fee. Capital One and Discover are the only two companies that do not charge a foreign transaction fee; Capital One actually pays the fee for you and Discover, since it’s not on the Visa or MasterCard network, just doesn’t charge for it. As I wrote in the other article, if you want to pick between the two then I’d go with Capital One because Discover isn’t as widely accepted overseas (Capital One cards are Visa or MC).

5. Change your card to a different type or rewards program

Do you have a Citi Platinum Select card and you would instead prefer to have a Citi Professional card? Just call up and ask; they’ll probably honor your request. If they don’t, just ask to cancel the card and retentions will probably do it for you. This will only work if they’re the same class of cards, so if you want to change from a Citi mtvU card (student) to a CitiBusiness card (business), that will probably be impossible (but still worth asking). They figure that you can always cancel and apply for the new card anyway so they might as well reduce their overhead by just shifting it over for you. It’s all about lowering costs for them and retaining the customer, converting cards is hardly a chore.

6. Most cards double manufacturer’s warranty

Most credit cards will cover purchases on that card to double the original manufacturer’s warranty, up to an additional year. This comes at absolutely no cost and it’s offered because most people never take advantage of it. Part of the reason is that you often forget this is something that is even offered in the first place (because most people think of manufacturer’s warranty first and then straight to repair or replace) and the credit cards only mention this when you’re buying.

7. Most cards offer auto rental liability insurance

This particular “secret” has been documented quite a bit lately, the fact that many credit cards offer some form of rental car insurance (collision and loss) if you use that card to pay for the rental. What it doesn’t cover your personal auto insurance may also cover so between the two you often don’t even need the insurance (really it’s a waiver) from the rental company in the first place. Some cards, such as American Express, have programs where you can pay extra to have additional coverage.

(Photo by mike hipple)

I just made a trip to China and one of the interesting things I learned before I left was that a credit card will often tack on a foreign currency transaction fee if you use your card abroad - this fee is tacked onto the cost of the purchase and is used to cover the foreign currency exchange, in theory. No matter what the reason, the fee still exists and it certainly would be helpful to know which card issuer charges the most and which charges the least right? So, check out the table below:

Card Issuer	Fee
Capital One	0%
Discover	0%
Wachovia	1%
Washington Mutual	1%
American Express	2%
Bank of America	3%
Citibank	3%
JP Morgan Chase	3%
Wells Fargo	3%
US Bank	3%

Visa and Mastercard automatically charge the card issuer 1% for the foreign currency transaction itself so a lot of the Visa/Mastercard cards will pass that onto the end user (which is included in the number above). Capital One is the lone exception, eating the fee, and Discover and American Express obviously aren’t on that network so don’t have that extra overhead.

It looks like Capital One and Discover are the best for this though I’d argue that you likely want to get a Capital One card because Discover isn’t as widely accepted overseas.