The latest... there seems to be a reaction (according to the Times) against the fees...
A Fee Even the Card Issuers Cannot Explain
By CHRISTOPHER ELLIOTT
LARRY BRADLEY switches credit cards an average of once a year, but not to rack up extra frequent-flier miles or to pin down a lower interest rate. Mr. Bradley, a small-business owner from Tyrone, Ga., swaps plastic to escape rising currency-conversion fees.
He has jumped from Visa to MasterCard to American Express, and back again, numerous times during the last decade in an effort to skirt surcharges on international transactions that have risen from 1 percent to as high as 4 percent. "It's a money grab," he grumbled. "Credit cards are hoping their customers won't read the fine print on their cardholder agreements. But I do."
Some customers apparently do pay attention, though. Just last Thursday Visa suspended its 1 percent international service assessment on all single-currency cross-border transactions. In a statement, Visa said only that it was "reviewing the fee structure," but you can't help suspecting that complaints from customers was the reason.
Despite that small victory, I have come to the same conclusion Mr. Bradley did: Many - if not all - of the charges are unjustified. Credit card companies beg to differ, of course. So I asked them to explain their reasoning.
Simon Barker, a spokesman for Visa, said the assessment pays for "the basic cost of having the access you get when you use Visa internationally." Such as? "It's for the benefit of using the card," he told me.
American Express, which exacts a 2 percent fee - raised from 1 percent in 1999 - would not discuss what it costs the company to exchange currency. But a spokeswoman, Desiree Fish, said its fee was in line with the industry. In other words, it imposes the cost because everyone else does.
It isn't just the credit card companies that have their fingers in your pocket. The big banks do, too. Wells Fargo, which issues my Visa card, will tack a 3 percent charge for handling the currency conversions during my trip to Europe this summer (returning 1 percentage point of that to Visa). Not a bad way to make a quick buck for an industry that pays just 1.5 percent for a three-month certificate of deposit.
Why such a hefty fee? To find out, I dialed Wells Fargo's customer hotline. The first phone representative admitted she had no idea. The second said it was because the bank needed to make more money. Neither answer quite worked for me, so I called the bank in my official capacity as a journalist. A spokeswoman said the combined 3 percent levy, which the bank has had in place since 2000, was necessary to cover both the "convenience" of using a card overseas and the cost and risk of the currency conversion.
Interesting concepts, but she was unable to elaborate with actual examples of Wells Fargo's expenses.
One of the most convincing explanations for these credit card charges came from Linda Sherry, a spokeswoman for Consumer Action, a nonprofit advocacy organization based in San Francisco that tracks credit card fees. "There's no legitimate reason for credit cards to charge currency-transaction fees," Ms. Sherry told me. "Simply put, it's a profit center for the banks and card companies. It's found money."
Nobody expects credit card companies and their banking partners to convert your dollars to euros and yen and back again free. They do incur costs and risks in conducting those transactions, after all. What grates business travelers like William Gregg, an intellectual property consultant in Portland, Ore., is the utter confusion that surrounds the terms - a vagueness that strikes some customers as willful.
Mr. Gregg tried to escape the fees by paying with a debit card, but the switch did nothing to exorcise his bafflement. "It's a total mess," Mr. Gregg said. "I make a purchase when I'm traveling internationally, and a few weeks later I get a statement, and all I'm told is this is how much I paid for it in dollars. And I'm totally in the dark. What's the rate I'm getting? Who knows? They're not telling me."
Recently, many banks and credit card companies reluctantly began breaking out the currency charges and rates after customers threatened to sue them, according to Ms. Sherry. But the progress is slow and the statements remain maddeningly difficult to decipher.
But beyond that, credit card companies should stop referring to these charges as conversion fees. If they're convenience fees, then why not say so? (How much should your credit card charge? The experts I've talked to say they could halve their fees and still turn a tidy profit.)
The solution for independent business travelers is to find a feeless card. They do exist. Some credit unions, for example, do not bill their members for currency exchanges. For corporate travelers who are part of a managed program, a fix must happen at a higher level, with a travel manager asking American Express, MasterCard or Visa for relief from these largely meaningless surcharges.
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JA
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