Using CC's in Foreign countries
 

I am the first to admit that I don't pay as much attention to that tiny little fine print that the credit card companies send announcing changes as I should. Just yesterday something caught my eye and I did read it. Our bank (US Bank) as of sometime in the near future will be charging a 3% fee on all foreign transactions. Many of you know that, in Costa Rica anyway, some places charge you the 6% bank fee to use a cc that they get charged. That can add up to 9% in additional charges! Add that to the whopping taxes and service charges and you could end up spending a lot more than you thought you would.

This is just an FYI for you to think about before whiping out that little piece of plastic. You might want to check with your cc company to see if they will be doing this also. You can probably check when you call them to let them know you will be using it out of the country.

Happy travels

Just returned from CR. We used a cash card to withdraw money from the ATM's. My credit union charged $2.50 per transaction and I was able to withdraw the equivalent of $250.00 US. Ergo a 1% charge. Don't use your credit card as you'll probably be charged interest fron the day of withdrawal.

Hello, I made with the european EC-Card the same experience. ATM´s of BNCR will give you max 200000 Colones ans for this transaction you pay a commision of 3.99 EUR. This is less more than 1%. But avoid to use the ATM´s on weekends. Often there is less money in it and maybe you will get only 20000 to 50000 Colones, then you have also to pay 3.99 EUR .
Saludos
costaklaus - www.costaricaweb.de

I believe both of the aspects you talk about have been going on for some time now.

A couple of years ago there was a news story on CNN to the effect that MC and Visa -- meaning the credit card authorities themselves, not individual banks or card issuers -- were putting a 1% flat surcharge on all foreign charges just for them. You'll find that most individual card issuers will add something for themselves, as well, moving that up a couple of points. But it may be only fair to them to keep in mind that in such situations, they are the ones doing the currency exchange operation (which is typically subject to surcharges anywhere) and they also typically give competitive exchange rates.

On the local side, credit card commissions to vendors can be quite high in Latin America -- 5% is not unusual here in Mexico, for example -- and many especially smaller vendors under pressure to break even cannot easily afford to give up that 5% across the board on so many transactions. Additionally, the rather less programmed and strict system than what you might find in the States, for example, means that transactions paid in cash may often go unreported for tax purposes and result in much greater savings for the vendors, which (even if wrongly) provides additional incentive to them to push people towards cash payment. (This in fact is behind discounts offered only for payment via cash, which is not trackable in the same way that a credit card transaction is.)

Not trying to say you should bite the bullet and pay with your credit card even if it costs you more. Just trying to note some of the reasons behind the numbers you mentioned.

Steve

Thank you Steve, Arbegold, costaklaus.

In Costa Rica there is a 6% charge for CC use I believe. Like Mexico it is an individual option as to whether to pass that on or not. One way or another it is, either by higher prices or passing on the cost directly. I understand that it can add up having had a business that accepted credit cards. We were only charged 3% and can really sympathize with those higher rates in countries that can least afford it. As far as the CC companies go... yes, there is an expense to have people take care of the conversions. On the other hand I didn't see too many go down very far on their interest rates when the prime went down. I don't think they are loosing a whole lot of money on the exchange process even at 1%. It is a dog eat dog world out there and, as you say, some vendors are making their little extra in the way of hiding cash purchases. That causes another whole set of problems in the loss of tax revenues.

I only mentioned the upcoming increase that we are seeing so that people who are possibly cutting it close on what they can afford will be reminded to also plan on these somewhat hidden expenses. Sometimes we do forget about them. Some will show up immediately at the time of the card use and others will show up later.

Oh I'm sure you're correct that the credit card companies are making out all right!!! :-) No doubt about that!

Passing on the charge is not just optional in Latin America, of course. Vendors would (as far as I know) be within their general rights to do the same thing in the U.S. It's just that it's so far outside the norms now that customers would be shocked and probably angry, so much so that it would be counterbeneficial to the vendor to try it. That said, don't places like Sam's Club or Costco add a small surcharge to your total for using a credit card there in the States? Anyone?

Steve