BEWARE OF HIDDEN CREDIT CARD CONVERSION FEES!

When you are traveling in Europe with your credit cards, it may sound like a friendly service offer when a merchant asks if you would like to have your charges processed in dollars instead of euros. In fact, if you are using most of the major bank credit cards (Capital One excluded), you might think it was a way to avoid paying the 1% to 3% currency conversion fees normally charged on your purchases.

You would be wrong! In addition to the normal currency conversion fee, which is still charged even on a dollar balance, you would also pay an additional fee to the merchant for changing your transaction into dollars.

What benefit does having a bill in dollars offer over having the total in euros? Absolutely none. The only advantage would be in knowing the exact daily currency conversion rate, but then your fees would still be added to that total.

You are more likely to be offered this choice between a dollar or a local currency transaction in the future, as merchants use dynamic currency conversions to make additional revenue on your purchases by charging a mark-up for the service. Although American Express does not participate with their cards, Visa and MasterCard do.

Visa does have a global compliance program which stipulates that retailers disclose all currency conversion rates and any associated fees to consumers, so they can make an informed decision about accepting a dollar or local currency transaction. However, this explanation may not always be forthcoming.

As an informed consumer, you can protect yourself against unnecessary fees by refusing all dynamic currency conversions to dollars and by using a credit card without foreign transaction fees. It may also be easier to use your ATM card and keep track of your small purchases using cash.

Have you ever been surprised by extra credit card fees on purchases made while traveling outside the country?