Credit card currency conversion rates

Introducing a new rip-off from your friendly credit card issuer.

A reader writes:

My Visa card used to be an excellent deal for foreign travel. Charges were converted at the interbank currency rate, since the clearing center dealt in zillions of dollars daily. Much lower transaction cost than an individual could get. Visa could still make money by offsetting transactions (e.g., charges in francs payable in dollars and charges in dollars payable in francs). It only had to convert the difference.

Then, it moved to the consumer conversion rate. It kept another fraction of a percent, but I still did as well as I could at a currency exchange.

Now, it will add a 3% “foreign currency transaction fee” on top. Back to the Bureau de Change!

Question: Is this a change made at the level of VISA International, or is there bank-to-bank variation? How about MasterCard, AMEX, and Diner’s? I don’t travel that much, but I have learned to count on being able to use my credit card and not worry about conversion charges. Is that over with?

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: Markarkleiman-at-gmail.com