I hate it when I’m right about something like this. A few days ago, I warned that the Credit Card Accountability Responsibility and Disclosure Act of 2009 had a gaping loophole that could force us to pay a foreign transaction fee whenever we crossed a border.
Not only is that proving accurate, but the truth is much worse. Now you don’t even have to travel to get dinged by one of these bogus surcharges.
Here’s what happened to Sunil Kadam when he booked a ticket through Expedia.
I live in Boston and I booked my parent’s tickets from Expedia.com from Mumbai to New York on Qatar Airways. When my credit card statement came, I found a foreign transaction fee of $44 which was two percent of ticket price.
When I contacted Citi Card (my credit card company), they said Qatar Air is foreign airline, hence there is foreign transaction fee. Expedia says they give the transaction to Qatar’s US office in Washington, who should process the transaction in United States. Expedia is not doing any transaction (but still charging $14 booking fee).
When I contacted Qatar’s office in D.C., they are saying this not their problem either. Qatar Air’s D.C. office process all payments through their central server. So they are telling me to check with Citi again. I tried to dispute that charge but as per Citi’s “agreement” you can dispute the foreign transaction itself but not the foreign transaction fee.
Do you think I should be paying foreign transaction fee for the transaction I have made in US with a US company (Expedia)?
Of course not.
I asked Expedia what was happening. Here’s what I heard back.
Expedia’s customer service team researched this case, and found that Expedia submitted the round-trip amount ($1,468.80) to Qatar Airlines as a U.S.-based purchase. Qatar Airlines verified that they processed the charge via their central reservation system based in Washington D.C. The customer’s credit card company, Citibank, then charged a foreign transaction fee in line with its cardholder agreement with the customer.
It is Expedia’s assessment that the customer’s credit card company is charging a fee, likely because Qatar Airlines is not a U.S.-based company, per its cardholder agreement. Because the fee was not charged by Expedia.com or Qatar Airlines, neither Expedia nor Qatar Airlines has the authority to reverse this charge.
By this logic, I could get charged a foreign transaction fee by doing business with any non-US company, even if the charge takes place in the United States. If I buy a Sony camcorder or a set of Henckels knives — ding! — there’s two percent!
The intent of the just-signed credit card bill was to stop these ridiculous foreign transaction fees, but vague language left the door open for charging them. (For the record, some concerned citizens tried to warn Rep. Barney Frank about this loophole when the bill was in committee, but to no avail.)
Now the new fees seem to be popping up everywhere.
Kadam has several options. He can complain to the Federal Trade Commission, which has oversight responsibility for credit cards. Technically, Citi may be regulated by the Office of Thrift Supervision. In the short term, a trip to small claims court might get him the $44 back, but I don’t think that’s realistic, since his court costs would almost certainly be higher than $44.
The government needs to clarify what it means by a “foreign exchange fee” — and soon. Otherwise, we’ll all be paying these fees for anything manufactured by a non-US company.
That would be madness.
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Great article Chris. I don’t know if it will help, but this morning I dashed off emails to my two senators, and my representative about this issue. It certainly can’t hurt to send them the complaint. If they get enough complaints they usually act.
As to small claims court, every small claims court I’m familiar with allows you to sue up to a maximum amount, PLUS costs.
I hope everyone who reads your article will contact their Congressional representatives too.
I’ve found $259 of foreign transaction fees on my credit card statement for booking a cruise to Alaska through a Dallas, Texas based travel agency. I’m not even sure where to start to contest this fee.
Christopher, who is the recipient of my generous $259 “donation”?
I know it’s not the travel agency’s fault, but shouldn’t agencies be alerting clients of these fees? If I had been informed of the fee, I could have made an intelligent decision and paid by check to avoid the fee all together.
Chris – I don’t think you can blame Credit Card Accountability Responsibility and Disclosure Act of 2009 because it hasn’t ben implemented yet. If you look deeper into Mr. Kadam’s transaction I think you might find the answer.
The part that is unexplained about the Expedia issue with Qatar Airlways is why didn’t Expedia issue the ticket through ARC and why did Qatar Airways issue the ticket overseas? It might be that Qatar Airways through Expedia was quoting a fare that is not available if ticketed in the United States but only available if ticketed at overseas. It is possible that there could have been significant savings because of the overseas ticketing. If that were the case then it might be a foreign transaction and subject to foreign transaction fee, just as if he had been in Mumbai and used his US based credit card. I’ll bet that if he looks at his credit card statement he’ll find that the ticket fare was based in Indian Rubees and converted to USD on his credit card statement. If there is not significant savings issuing the ticket this way then Expedia has some more explaining to do.
When I saw a foreign transaction fee on my account, I called CitiBank to tie it to a charge. Turned out to be for a membership fee on my wife’s new Wii fitness system. I called Wii and pitched a fit and the charge was reversed. Then, calling Citi, the CSR agreed to reverse the charge–she did twice!
If you have or can open a Schwab brokerage account, they have a VISA card that pays 2% cash-back, paid to your brokerage account, on unlimited purchases and there is no annual or foreign transaction fees, or maximum credit limit.
Through the Schwab bank account, a ATM card is available worldwide with no fees and unspecified (except for your account limit) withdrawl amounts. You pay only the commercial bank exchange rate for all foreign currency transactions.
Sheila,
This is a credit card fee and your agent would have no idea that your credit card was charging it to you. Your issue is with your credit card provider not with your agent. I’d call my credit card and raise hell…….not that its going to do much good ;-(
Kevin.
Hi,
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Fees can indeed be everywhere. A former cell phone vendor was using a processing center in Canada. There was no notice on their website or in any of their literature but every month and additional $3.99 foreign charge fee appeared. After calling the company and asking for management, I received a credit equal to a years worth of processing charges but no explanation about when detail of this would be sent to consumers or posted on their website. I left the service soon after. A fee for service, a foreign transaction fee, and bank fee for a foreign transaction was just too much!
I was shocked when I discovered that my AA Citi/MasterCard charged a 3% “foreing transaction fee” for a purchase of an ELAL flight ticket NY-Tel Aviv-NY, that I purchased over the website, in the US. The ticket was purchased in dollar currency, the invoice I received from ELAL is in dollar amount ($1423,40) and it clearly states that there will be no additional taxes nor monetary supmenents, so I was confident that would be it (already an expensive ticket, right?) Of course ELAL is not responsible ot this awful charge, but at least they could make us aware that if we purchased a ticket over the website we may be incurring in a 3% “foreign transaction fee” if we use V/MC. (I don’t know about AmEx, someone told me I could have avoided the charged if I used an AmEx card).
There was no way for me to anticipate this transaction fee. It was very clear to me that the transaction was processed in the US (US currency, US invoice, English-language website). It seems that ELAL processes website transactions at their Ben Gurion Airport, Israel, and this is why the credit card considered it to be a “foreign transaction”. Not that I purchased over the website -that doesn’t matter. For the credit card, it is the same as if I was in Israel and I purchased the ticket over a counter there. Funny, ha?
I called the credit card company. I complained and said I would dispute the charge, and the customer service representative screamed to me (Yes, she screamed) No! You cannot dispute this charge!!!!
I will, of course. F…ing credit cards!