Joanna Au bought roundtrip plane tickets to Hong Kong through Singapore Airlines’ website. Even though the tickets were purchased in the United States, in dollars, she’s being charged a three percent “foreign transaction fee” by her bank. Au feels scammed.
Foreign transaction fees are common for most credit cards. However, these charges usually apply to purchases made outside of the U.S. Au used her Citibank Mastercard to make the purchase.
When she brought this issue to our attention, suggested she contact her bank in writing, explaining that the purchase was made in the United States, using dollars.
The bank said it wouldn’t refund her fee, which came to $55.
How is that possible?
After further research I discovered some interesting facts about the foreign transaction fee.
First, you don’t have to leave American soil to be charged a foreign transaction fee. Any time you make a purchase online that is processed through an overseas merchant, you could be charged this fee.
How can you tell if it’s an overseas merchant? If the prices are quoted in a foreign currency, then you’re probably dealing with an overseas merchant.
But here’s the rub: The fees are charged by your bank, not the merchant, and the cost to the bank of the transaction is zero. In other words, there’s no currency exchange taking place — it’s nothing more than a fee for the convenience of dealing with an international merchant.
Banks often back down when they’re confronted with this fact, and refund the foreign transaction fee. But not this time.