Refund Alert: Credit Card Foreign Fees

Wednesday, April 11, 2007

Banks add a junk fee of up to 3% called a ”currency conversion fee” when you used your credit card in foreign countries. Critics charge that this fee is pure profit for the banks. For many years, these fees were charged in a deceptive way—the extra 3% was not broken out as a separate line item. Most cardholders had no idea they were being overcharged, since the fee was hidden in the converted charge.

Consumer outrage led to a class action lawsuit, and last year, banks and credit card processors agreed to pay $336 million of the estimated $3.8 billion consumers had paid in fees. Although the lawsuit was settled in November 2006, many eligible cardholders may be unaware they can reclaim the money they paid in fees.

If you used any U.S. credit card or debit card with a VISA or MasterCard logo abroad between Feb. 1, 1996 and Nov. 8, 2006, you are eligible for a refund. (You also qualify if you used a Diners Club card).

Although cardholders have until January 2008 to file claims, we advise you to file sooner rather than later. Studies of rebates have found that the more time consumers are given to submit a form, the less likely that the form will ever be submitted.

If you are eligible, use the online claim form or the one sent to many credit cardholders with their billing statements. Enter your account number and the amounts you spent overseas in each of the applicable years. Alternatively, you can provide the last four digits of your Social Security number. (The online form we link to from the Consumer Action site is secure.)

How can you determine how much you spent abroad? If your bank was one of the defendants (Visa, MasterCard, Bank of America, Citigroup, HSBC, Chase, Washington Mutual, and some affiliates), it must provide you with up to six monthly statements—but only if the statements are available electronically. You can also provide estimates. (Since some of the claims will be audited, make sure your estimates are accurate and that you can prove you were out of the country at these times.)

As usual in these settlements, banks and credit card processors have denied wrongdoing. This is hard to believe—who would pay $336 million in restitution if there wasn’t some truth to the allegation?

Unfortunately, the lawsuit did not eliminate the fee, but it led to better disclosure. The fee is still the norm when you use your credit or debit card abroad. If you travel overseas frequently, get a credit card that does not impose a foreign currency conversion fee. Amalgamated Bank and Capital One are two card issuers that don’t charge the fees.

What is your Fee of the Week? E-mail us at the Hotline.