Q.  A client told me she received her first credit card statement after a recent vacation in Europe, and found the bank charged a total of 3% in additional fees, without any advance warning. She wanted to know, is this practice legal?

A.  For many years, major credit card issuers have tacked on these surcharges when you use your card to purchase meals, souvenirs, or other goods and services outside the USA (and the practice is spreading to debit cards, too). Visa USA/Visa International and MasterCard International routinely charge a 1% fee on overseas transactions to the banks that issue credit cards. The banks in turn usually pass along that fee to cardholders, as well as an additional 1%-2% charge for the banks themselves.

The practice is legal -- but many consumers hate these fees!  On the one hand, Bankrate.com says using your card overseas will give you the bank's corporate exchange rate -- a better deal than the 5%-8% from a local bank or exchange kiosk. However, Visa and MasterCard have buried many details as part of your fine-print cardholder agreement. Also, these surcharges are usually shown as part of the price of the good and services you bought (rather than being broken out as separate fees on your billing statement).

Q.  Clients ask, what can I do to protect myself?

A.  Pick a credit card issuer that does not charge the fees. Almost every bank passes along the mandatory 1% charge imposed by Visa or MasterCard, but MBNA Corp. and many community banks and credit unions that issue their own cards do not add their own additional fees. (Compare that to Bank One, Citibank, and J.P. Morgan Chase, which tack on an additional 2% fee, or American Express, which charges a total of 2%.)

You should also call your own bank before you leave; find out what the surcharge is and inform them you will be making purchases in a foreign place, as many security-screening systems now cancel consumer's credit cards when they detect unfamiliar spending patterns.

By the way, in February 2003, a California state court ruled that Visa and MasterCard may be forced to refund almost $500 million in fees collected in recent years. This ruling may keep the credit card companies more honest in the future about hidden fees! 
  
  This information is provided to FTF members as a courtesy by family travel specialist Debbie Gioquindo of Personal Touch Travel, Poughkeepsie, New York (845/485-7221; www.debgio-ctc.com).