Are no foreign purchase fees on credit cards a scam?

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Are no foreign purchase fees on credit cards a scam?

Postby AndroAsc » Sat Jun 29, 2013 7:12 pm

Ok, so I've seen a few credit cards here and there that claim they charge no foreign purchase fee, so it's good to bring with you on an international trip.

But how true is this? Can't the card issuer just set the forex rate to be a bit more unfavorable (to the consumer) relative to their other cards that charge a fee for foreign transactions? In this way the usual 2-3% fee that most cards have is built into the less favorable exchange rates for these no fee cards.

Is there anyone on the board that travels a lot, and have done some detailed analysis?
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Re: Are no foreign purchase fees on credit cards a scam?

Postby livesoft » Sat Jun 29, 2013 7:14 pm

I travel alot. My CapOne card has always given superb exchange rates.

But I'll let you decide:
15 MAY A.T.U TURIZM/MAIN DUTYISTANBULTUR CURRENCY: TRY EXCHANGE RATE: 1.822745902
...
08 JUN ZOOS VICTORIAHEALESVILLEVIC CURRENCY: AUD EXCHANGE RATE: 1.060544494
09 JUN NATIONAL GALLERY OF VISOUTHBANK CURRENCY: AUD EXCHANGE RATE: 1.060180854
09 JUN NATIONAL GALLERY OF VISOUTHBANK CURRENCY: AUD EXCHANGE RATE: 1.060606061
...
12 JUN EBISUAUCKLAND CURRENCY: NZD EXCHANGE RATE: 1.266089892
13 JUN FULLERS - PIER 2 KIOSKAUCKLAND CURRENCY: NZD EXCHANGE RATE: 1.265822785

It's interesting to me that the exchange rate seems to be calculated at the instant of the charge as the rates are different for transactions on the same day. Perhaps this is also a function of the size of the transaction.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Are no foreign purchase fees on credit cards a scam?

Postby killjoy2012 » Sat Jun 29, 2013 7:28 pm

I agree, CapitalOne has always given me very competitive exchange rates. I don't have historical data to prove it to you, but I always compare the exchange rate my Credit Union gave me throughout the trip for ATM withdraws vs. the exchange rate per cc purchase, and they were always extremely close. Certainly no where close to 2-3% more.
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Re: Are no foreign purchase fees on credit cards a scam?

Postby tj-longterm » Sat Jun 29, 2013 8:05 pm

AndroAsc wrote:But how true is this? Can't the card issuer just set the forex rate to be a bit more unfavorable (to the consumer) relative to their other cards that charge a fee for foreign transactions? In this way the usual 2-3% fee that most cards have is built into the less favorable exchange rates for these no fee cards.


If they can "just set the forex rate to be a bit more unfavorable", why wouldn't they do this with cards with foreign transaction fees too and make even more money?

Your agreement with the credit card company states how the rate is determined, so you can compare if you wish.
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Re: Are no foreign purchase fees on credit cards a scam?

Postby BrandonBogle » Sat Jun 29, 2013 8:07 pm

My PenFed Visa charges no forex fee.

Before, the fee used to be embedded on US cards, but a few years ago, Feds made this a separate line item. That way, you could see the conversion rate done by Visa or MC, and what the card issuer pocketed.

No these no forex fee cards don't pocket anything extra from the conversion, and you simply get the Visa/MC network exchange rate, which does not change from bank to bank within the same country. This exchange rate is readily found via Google.

As I am currently traveling internationally, this has been great and every posted payment had matched to the penny of what I found to be the conversion rate for the local currency to US Dollars.
http://corporate.visa.com/pd/consumer_s ... _rates.jsp
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Re: Are no foreign purchase fees on credit cards a scam?

Postby VictoriaF » Sun Jun 30, 2013 3:09 pm

I will be in Europe for two and half weeks and will be withdrawing some cash using my VISA. While PenFed does not have fees on the VISA, it will start charging interest on the cash withdrawals immediately.
- Does it make sense to over-pay my balance and create some credit on my VISA account, so that cash withdrawals would be reducing the credit rather than generating interest-charging debit?
- Are there any drawbacks in creating this "extra credit" with VISA?

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Re: Are no foreign purchase fees on credit cards a scam?

Postby livesoft » Sun Jun 30, 2013 3:14 pm

That's an interesting question. I have never used a cash-advance on my credit cards or used a credit card at an ATM. A cash-advance has a fee that a charge does not, so I would be leery of this. I do know some stores will allow "cash out" if you request which in the US we say "cash back". I don't do that in the US either.

If I withdraw cash, I would use my separate ATM card.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Are no foreign purchase fees on credit cards a scam?

Postby Cash » Sun Jun 30, 2013 3:19 pm

Agreed. I keep a checking account at Schwab specifically and only for international travel (they reimburse ATM fees). I transfer money in before I leave; transfer it out once I'm back.
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Re: Are no foreign purchase fees on credit cards a scam?

Postby Carl53 » Sun Jun 30, 2013 4:25 pm

VictoriaF wrote:I will be in Europe for two and half weeks and will be withdrawing some cash using my VISA. While PenFed does not have fees on the VISA, it will start charging interest on the cash withdrawals immediately.
- Does it make sense to over-pay my balance and create some credit on my VISA account, so that cash withdrawals would be reducing the credit rather than generating interest-charging debit?
- Are there any drawbacks in creating this "extra credit" with VISA?

Victoria


When I used this card for cash advances in Australia, I incurred no fees (at some but not all bank ATMS), but did experience the interest charge you speak of. My interest charges totaled about $14 for about $3200 or ATM withdrawals over two months. Note that I had my account to pay off the balance automatically on the due date, but doing so left the interest compound for an extra couple of weeks. I did make an additional partial payment while overseas to avoid going over my credit limit as I charged to the card quite a bit too. I do not see any problem with doing what you are suggesting and would consider it when I next travel overseas. Thanks for the idea, and look forward to hearing how doing so worked out.

Enjoy your trip!
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Re: Are no foreign purchase fees on credit cards a scam?

Postby VictoriaF » Sun Jun 30, 2013 4:31 pm

Carl53 wrote:
VictoriaF wrote:I will be in Europe for two and half weeks and will be withdrawing some cash using my VISA. While PenFed does not have fees on the VISA, it will start charging interest on the cash withdrawals immediately.
- Does it make sense to over-pay my balance and create some credit on my VISA account, so that cash withdrawals would be reducing the credit rather than generating interest-charging debit?
- Are there any drawbacks in creating this "extra credit" with VISA?

Victoria


When I used this card for cash advances in Australia, I incurred no fees (at some but not all bank ATMS), but did experience the interest charge you speak of. My interest charges totaled about $14 for about $3200 or ATM withdrawals over two months. Note that I had my account to pay off the balance automatically on the due date, but doing so left the interest compound for an extra couple of weeks. I did make an additional partial payment while overseas to avoid going over my credit limit as I charged to the card quite a bit too. I do not see any problem with doing what you are suggesting and would consider it when I next travel overseas. Thanks for the idea, and look forward to hearing how doing so worked out.

Enjoy your trip!


Carl,

Thank you. $14 is a small amount--and would be even smaller for my projected expenses--but I prefer avoiding fees if I can. I will report how it will have worked for me.

Victoria
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Re: Are no foreign purchase fees on credit cards a scam?

Postby WHL » Mon Jul 01, 2013 9:20 pm

I've never done hardcore research, but I haven't ever seen charges or fees from using my Chase no-FTF cards overseas.

VictoriaF wrote:
Carl53 wrote:
VictoriaF wrote:I will be in Europe for two and half weeks and will be withdrawing some cash using my VISA. While PenFed does not have fees on the VISA, it will start charging interest on the cash withdrawals immediately.
- Does it make sense to over-pay my balance and create some credit on my VISA account, so that cash withdrawals would be reducing the credit rather than generating interest-charging debit?
- Are there any drawbacks in creating this "extra credit" with VISA?

Victoria



When I used this card for cash advances in Australia, I incurred no fees (at some but not all bank ATMS), but did experience the interest charge you speak of. My interest charges totaled about $14 for about $3200 or ATM withdrawals over two months. Note that I had my account to pay off the balance automatically on the due date, but doing so left the interest compound for an extra couple of weeks. I did make an additional partial payment while overseas to avoid going over my credit limit as I charged to the card quite a bit too. I do not see any problem with doing what you are suggesting and would consider it when I next travel overseas. Thanks for the idea, and look forward to hearing how doing so worked out.

Enjoy your trip!


Carl,

Thank you. $14 is a small amount--and would be even smaller for my projected expenses--but I prefer avoiding fees if I can. I will report how it will have worked for me.

Victoria



Why would you do this instead of just getting cash before you leave the states?
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Re: Are no foreign purchase fees on credit cards a scam?

Postby Carl53 » Tue Jul 02, 2013 5:54 am

WHL wrote:I've never done hardcore research, but I haven't ever seen charges or fees from using my Chase no-FTF cards overseas.

VictoriaF wrote:
Carl53 wrote:
VictoriaF wrote:I will be in Europe for two and half weeks and will be withdrawing some cash using my VISA. While PenFed does not have fees on the VISA, it will start charging interest on the cash withdrawals immediately.
- Does it make sense to over-pay my balance and create some credit on my VISA account, so that cash withdrawals would be reducing the credit rather than generating interest-charging debit?
- Are there any drawbacks in creating this "extra credit" with VISA?

Victoria



When I used this card for cash advances in Australia, I incurred no fees (at some but not all bank ATMS), but did experience the interest charge you speak of. My interest charges totaled about $14 for about $3200 or ATM withdrawals over two months. Note that I had my account to pay off the balance automatically on the due date, but doing so left the interest compound for an extra couple of weeks. I did make an additional partial payment while overseas to avoid going over my credit limit as I charged to the card quite a bit too. I do not see any problem with doing what you are suggesting and would consider it when I next travel overseas. Thanks for the idea, and look forward to hearing how doing so worked out.

Enjoy your trip!


Carl,

Thank you. $14 is a small amount--and would be even smaller for my projected expenses--but I prefer avoiding fees if I can. I will report how it will have worked for me.

Victoria



Why would you do this instead of just getting cash before you leave the states?


In my case, my needs while in Australia for Aussie dollars were quite uncertain before I left. Converting in the US would have been expensive and the potential to have to reconvert would have been large. Plus I saw no need to carry a large amount of cash with me for the entire trip. Many merchants did not accept credit cards or charged 3% fees, which my daughter alerted me to prior to our travel.
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Re: Are no foreign purchase fees on credit cards a scam?

Postby m2go » Wed Jul 03, 2013 6:50 pm

Q: Why would you do this instead of just getting cash before you leave the states?

A: Usually, getting foreign currency as cash in the US is an expensive and cumbersome process, involving horrid buy/sell spreads, and to add insult to injury, you might pay additional fees. Getting cash at ATM at the commercial exchange rate is almost always more advantageous in terms of exchange rate, and more secure, because you don't have to carry around currency.
Last edited by m2go on Wed Jul 03, 2013 7:47 pm, edited 1 time in total.
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Re: Are no foreign purchase fees on credit cards a scam?

Postby livesoft » Wed Jul 03, 2013 7:02 pm

Carl53 wrote:When I used this card for cash advances in Australia, ...

I was recently in Australia & New Zealand for a couple of weeks. I did not need cash at all and never used an ATM. I only saw students using cash, but I suppose they did not have credit cards.

Another way to get cash is to pay for some shared expense with your credit card and have folks that you shared with pay you back in cash. Examples might be a shared meal, taxi, bus, or tickets to a museum, Zoo. Etc.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Are no foreign purchase fees on credit cards a scam?

Postby partner » Wed Jul 03, 2013 7:44 pm

BrandonBogle wrote:My PenFed Visa charges no forex fee.

Before, the fee used to be embedded on US cards, but a few years ago, Feds made this a separate line item. That way, you could see the conversion rate done by Visa or MC, and what the card issuer pocketed.

No these no forex fee cards don't pocket anything extra from the conversion, and you simply get the Visa/MC network exchange rate, which does not change from bank to bank within the same country. This exchange rate is readily found via Google.

As I am currently traveling internationally, this has been great and every posted payment had matched to the penny of what I found to be the conversion rate for the local currency to US Dollars.
http://corporate.visa.com/pd/consumer_s ... _rates.jsp


I used my penfed visa CC for atm cash on a trip to Ireland. I paid the complete balance off online as soon as I got home. Don't remember the amount but the interest/fee was miniscule, much less than any other way of getting cash. BTW, I have never paid a fee (by atm owner/bank) to use a cash machine (what they call atms) anywhere in Europe.
I used my Citi world mastercard (prepaid to travel agent before trip)to rent a car at dan dooley in ireland. They require a 80E deposit for the gas. They did not ask me if I wanted it charged in Euro's or dollars. they just did it in dollars (107.xx). When I returned it with a full tank, they refunded my deposit. When my statement came, I noticed that they had refunded in Euros, which came to $103.xx. I called citi and complained hoping they would reprimand dan dooley. but all they did was credit me the difference. When companies do the exchange, they get to use any rate they want.
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Re: Are no foreign purchase fees on credit cards a scam?

Postby wriggly » Thu Jul 04, 2013 5:16 am

VictoriaF wrote:I will be in Europe for two and half weeks and will be withdrawing some cash using my VISA. While PenFed does not have fees on the VISA, it will start charging interest on the cash withdrawals immediately.
- Does it make sense to over-pay my balance and create some credit on my VISA account, so that cash withdrawals would be reducing the credit rather than generating interest-charging debit?
- Are there any drawbacks in creating this "extra credit" with VISA?


Check your T&Cs which may specify how they deal with over-payments (building up credit) and the order in which payments are applied. The card company may apply payments to the cheapest credit first, which means they'll apply the payment to your interest-free hotel bill before your interest-bearing cash withdrawal.

My (UK) card pays off the more expensive charges first, so I wait a few days until the cash transaction appears to avoid paying off my free credit, then use Internet banking to transfer a payment into my credit card account.
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Re: Are no foreign purchase fees on credit cards a scam?

Postby Alskar » Sat Jul 06, 2013 12:24 am

I don't travel as much as livesoft, but I do travel quite a bit and my experience with my Capital One Signature Visa card closely tracks his.

The statements I get from Capital One show the exchange rate used on each transaction. I've spent some time looking up the wholesale exchange rates that were in effect the day of a few big transactions and they closely match those used by Capital One.

My Capital One Signature Visa card gives me 1.25% cashback on every purchase and no foreign transaction fees. Its my "go to" card when traveling outside the US or when making purchases online from overseas websites.
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