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Credit card charges gone wild: “international transaction fee” added to Puerto Rico purchase

January 8, 2010

Now it’s gone too far.

When Leticia Lopez returned to Albuquerque from her trip to Puerto Rico, she found an “international transaction fee” added to every purchase on her credit card bill.

See the problem?

Puerto Rico isn’t an international destination. It’s an unincorporated, organized territory of the US with commonwealth status — meaning you pay in dollars and don’t have to show a passport before being let on the island.

Lopez is furious.

I have paid such fees in the past when I have used my Visa card in many countries I have visited and understand that it is warranted in those cases because there are different currencies that have to be converted.

However, in Puerto Rico, there is no other currency but the U.S. dollar. I contacted State Farm Bank and pointed this out to them, as well as the fact that I did not have to use a passport to travel to Puerto Rico nor go through international flight immigration and customs there or on the return.

They insisted that Puerto Rico is international travel, and would not remove the $16 fees in international transaction fees.

Adding an “international transaction fee” to Lopez’ bill is nothing more than a money grab by her credit card company. I suggested that she appeal this decision, which she’s in the process of doing.

This is just the latest in a series of abuses by credit card companies in the wake of credit card reforms that will take affect later this year. I’ve mentioned international transaction fees in several previous posts, including this one. The Center for Responsible Lending also has a thorough report on the issue.

How does this affect you? Now more than ever, it’s important to review your credit card bill often, particularly when you’re traveling. (My credit card company just changed its terms and conditions, and odds are yours has, or will.) These revisions are designed to extract more money from you. And travelers are an easy target.

Dispute any funny fees immediately. If your credit card company insists on boneheaded charges like an “international transaction fee” for purchases in Puerto Rico, dump the card and find a better one.

Update (Jan. 11): Lopez’ bank has responded.

As stated in your Credit Card Agreement and Disclosure Statement, if you use your card to make an international transaction, we will assess a FINANCE CHARGE equal to 1.0% of the U.S. dollar amount of the transaction. An international transaction is defined as any transaction that was acquired in any country other than the United States. Puerto Rico is still considered a Latin America country as it pertains to currency conversion–thus the fee is charged. Visa charges State Farm Bank Visa, along with ALL other issuers for cross border transactions thus being the reason for the charges which were placed on your account.

As a courtesy, I have waived the amount of $16.81 total International Transaction Fees from your account. I do need to strongly caution you that if you use your State Farm Bank Visa card in Puerto Rico that there will be International Transaction Fees and we will not be able to remove from your account.

Christopher Elliott is the author of Scammed: How to Save Your Money and Find Better Service in a World of Schemes, Swindles, and Shady Deals. Critics have called it “eye-opening” and “inspiring” — it’ll “grab your attention and won’t let go.” Order your copy now on Amazon, Barnes & Noble or iTunes.

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75 comments

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  • Carver

    I feel Ms. Lopez’ pain. Growing up in the Virgin Islands, which is literally next door to Puerto Rico, I can’t tell you the number of conversations I’ve had with business people who swear our that the Virgin Islands and/or Puerto Rico are international destinations.

    If its worth it, she should keep fighting. Eventually she will find someone in the organization who passed 10th grade geography.

  • Lianne

    That is the most absurd thing I have ever heard!!!! Puerto Rico is NOT international travel by any means!!!

  • Liz

    I think I would waste the time and money on this to take it to small claims court – for geographical correctness alone.

    Amazing.

  • http://praguepartmentsonline.com Martin Smith

    You are exactly right about this. I just cancelled the Black Card from Barclays and got myself a Capital One card which is the only one I could find that doesn’t make this ridiculous charge. I am now in the process of writing the Comptroller of the Currency as Barclays has just refused for the second time to refund my fees for that card. We have to strike back. Elliott try and get us some media attention on this. If you get hit with 3% on a transaction that is the equivalent to an interest fee more than 360% in just simple interest which they couldn’t get away with.
    A per transaction fee of a few dollars might be understandable but this egregious and intolerable abuse of their power can not stand.

  • http://cestbeth.wordpress.com Beth

    This makes absolutely no sense. And there’s no currency exchange since it’s a US commonwealth, which is usually the driving force for these transaction fees. What about the USVI? Is that also considered international by the credit card companies?

  • Wrona

    Considering the number of people who ask if they need passports to fly to Puerto Rico or the Virgin Islands is anybody truly shocked by this?

  • Suzy Bennett

    So, is it time to return to travelers checks when traveling overseas?

  • Christine Brusseau-Curtis

    I just rang CIBC Visa here in Montreal, and although there is NO international transaction fee, they confirmed that a 2.5% “fee” was added to all foreign currency charges. So if I purchase an item in South African Rand (ZAR), regardless of the exchange rate, the 2.5% automatically goes on top. This applies to ALL foreign currency charges. MasterCard…same deal. So the make money on the exchange rate, if if the rate is 10%, they grab another 2.5% so the $100 charge is now $112.50…
    An alternative is to pay cash or use the ATM machine except in countries with high crime rates. Also, by paying cash, some establishments will give you a discount. There is usually a charge when using the ATM as well. If an exchange rate is 10%, the home bank will also tack on another percentage for processing. This is all part and parcel of international travel and the cost of doing business. When I travel to the US, I use my US dollar Mastercard so when the bill arrives, I simply pay in USD with no 2.5 exchange rate.
    Unfortunately, it’s not that easy when traveling abroad.
    Best to check your credit card bill after a trip…you will find that the exchange rate is not very favorable!

  • Jean Binkovitz

    CapitalOne has been the only card I’ve found that waives these fees.

  • Chris in NC

    Wow! This is absurd… what are they going to think of next? Adding a “foreign transaction fee” on travel to Hawaii and Alaska because it isn’t part of the lower 48 states? As everyone has pointed out, Puerto Rico IS part of the US! Looks like someone flunked 4th grade geography!

  • GREGGsTRAVEL

    ….even some people at American Airlines insist that San Juan, Puerto Rico is an international destination, so this case with the credit cards does not surprise me!

  • Ty

    I’m surprised they haven’t started doing this in Alaska. You would be surprised at the number of people that don’t realize Alaska is part of the US. I have had items shipped up here from the lower 48 with paperwork attached for when it goes through customs by the shipper (part of the US = no customs). Tourists come up here and are surprised when they can use dollars.

  • Richard

    I purchased a Chicago hotel room prepaid from an online travel agent. I was referred to them by Sidestep.com who searched out the rates and then I clicked on the best deal and was forwarded on to the online travel agency site. When I received the credit card bill there was a currency exchange rate fee tacked on ($18 or so). The travel agency was in Israel. I found that out only after looking up their site online and clicking on the contact us button. It seems to me they should have honored the rate that was advertised. I let it go because the additional fee was a small amount and I had received a pretty good discount off the hotel’s regular rates. But it still seems like they should have had to honor the rate advertised or else disclosed the international currency fee?

  • LeeAnne

    We customers need to fight back. Just a reminder to all travelers that Capitol One appears to be the only bank that does not charge these unethical fees. They don’t always have the best interest rates, but if you’re like me and you pay off your cards every month, Capitol One is the way to go. If you tend to carry a balance, then get a Capitol One card just for travel, and use your other cards for all your other purchases.

    Also, write letters to banks that charge this fee. If banks receive enough letters from customers letting them know they are LOSING BUSINESS over this, perhaps they might stop.

    Christopher has been doing an excellent job of shining a spotlight on these types of fees. Keep it up, Christopher — and remind all your friends in the media! The more bad press these banks get, the more chance they’ll STOP.

    @Wrona – sad, ain’t it? I agree that it’s not a surprise that so many people make that mistake…but I’m confident somebody at these banks knows. This is a money-grab, plain and simple.

    BTW, there are actual foreign countries that use USD as their official currency…and that doesn’t stop banks from still tacking on this fee. I just returned from Ecuador, which dollarized in 2000. My friends used cards other than Capitol One, and got the fee tacked on. So clearly it has nothing to do with currency exchange.

  • Ron

    This doesn’t surprise me in the least. Having been in the travel business for over 20 years, I have heard them all. I understand it is basic geography, but you’d be surprised by how many people don’t understand that. There are very few weeks go by I don’t get asked about passports being needed for San Juan, St. Thomas or Hawaii. So, I repeat, it doesn’t surprise me that someone from a credit card company doesn’t know this.

  • Annie

    Actually, after recently coming back from St. Croix, I was hit with foreign transaction fees as well. I didn’t bother fighting for them, but now I am thinking I should….?

  • Chris in NC

    @ Ty
    One of my good friends is born and raised in New Mexico. She is always shocked when people say “thats funny… you don’t look like you are from Mexico.” Even worse is when they comment on how good her English is. In Hawaii, I often hear tourists say “back in the United States” not realizing that they never left the US! Didn’t realize that Alaskians had the same problem…

    Then again, there are parts of the Carolinas that are like a foreign country (I’m from here, so I can poke fun of where I grew up!)

    Each year, there is always an article about how bad Americans are with geography. So is anyone surprised by this?

  • Roberto

    Dang, I need to check my statements to see if my idiot bank is charging me fees for transactions in Washington, DC. It’s not a state, after all.

  • Jasper

    USVIs count as an international destination for US Air. Just flew there over Christmas.

    Furthermore, due to a weird visa status that I am in, I’ve had the Immigration and Naturalization Service call the State Department to figure out if I could travel to the USVIs and back without getting in trouble. It is, but they had to call, as they didn’t know themselves.

  • Dave

    The next thing to expect is a fee to use credit cards in New Mexico.

  • Josh

    The problem is that we (meaning consumers and regulators) let them get away with moving from charging for actual currency exchange (which is valid) to geographic purchase location even if the purchase is in US Dollars (which I’d argue is not). And sometimes they even charge for a purchase from a foreign-owned company (such as an airline) even if the purchase is processed in the US.

    It used to be (~10 years) ago relatively simple — if you’re travelling and the charge is run in local currency, you paid an exchange fee, if charged in US$, no fee. Of course, some merchants (and hotels) took advantage of that by offering to charge in US$…for an even worse exchange rate “for your convenience”

  • Joe Farrell

    aw heck, I’ve been to parts of the United States that SHOULD be foreign destinations – anyone been to Detroit lately? Parts of Latin America are nicer, and certainly most the small rural towns in Paraguay that used to be centers of banditry are probably safer. And now, a commitee decided that PR is a foreign destination because it generates a fee. No problems with geography – it just is.

    Try making a charge in USD overseas with merchants who still want dollars [eastern europe mostly] – there are no currency fees – but they try.

  • Erika

    @ Ty
    I, too, am an Alaskan and have similar experiences to yours. It really wouldn’t surprise me all that much if similar charges start showing up on the credit cards of travelers to the state. The geographic knowledge of some is unbelievably limited. I’ve been asked by tourists on the street where they can go to change their US Dollars for “Alaskan Money” and was once told (while waiting for a plane at a lower 48 airport) that I speak English very well for being from Alaska.

  • Kim

    I’m not at all surprised. About 10 years ago my ATM card wouldn’t work in Spain. It took the rep at my small town bank about 15 minutes to understand that 1) I was not at an ATM for that bank because I was in Spain and 2) that Spain is a foreign country.

  • Brian

    I always feared that credit card companies would target Puerto Rico and charge the ludicrous foreign transaction fee. Puerto Rico is not even a country but part of U.S. territory though not part of the 50 states. I guess in the credit card company’s minds; Puerto Rico is not a U.S. state therefore the fee is legit. I wonder if credit card companies would start targeting Hawaii and Alaska now because they are not within the U.S. My family recently came back from Europe and thank goodness we had the Capital One card which saved us a bundle. If any employee or executive from Capital One is reading this blog, please continue with what you’re doing right now, that is, no foreign transaction fees.

  • Lisa S

    Looks like more and more people should be getting a Capital One credit card. What’s in your wallet?

  • Cheryl

    My Capital One card just raised my interest from 6% to 23%, not due to any fault of my own, but reather the present economy. With that, I”m pretty sure they’ll be screwing with the transactions fees soon enough!

  • Cassivella

    When Ohio started doing mandatory testing in order to graduate from high school, the first question on the test was a map of the United States. It had a star in Washington state and a star in Washington, DC. It asked you to pick your nation’s capital.

    Statewide, 68% of students couldn’t tell the difference. At my old high school (a small rural school where literally every single student was a native English speaker born to parents who were native English speakers and US citizens), over 75% of the students didn’t know the difference.

    The second question was a map of the US with the states outlined. Again, 75% of the students couldn’t find Ohio on the map, even though the outline of Ohio had been on our license plates for longer than they had been alive.

    But, the parents said this test was too hard. It was too much to expect a high school senior to be able to figure out where he lived in the world. God forbid we cause a student embarrassment because they are either too dumb or too lazy to change the tv channel from MTV to CNN once in a while.

    But, now we are graduating students with the full knowledge that they can’t manage to pass such a simple test. Then, these people go and work at banks and argue with you that Puerto Rico is not part of the United States.

  • Carver

    @Leanne

    Capital One may be a good bank when times are good, but I dealt with them a few years ago on behalf of a client who has his identity stolen and fraudulent charges racked up for $1,500.00. They were the most difficult, hard-nosed, stonewalling people I’ve dealt with. All my other ID theft cases, for substantially more money, went smoothly. With Capital One, I had to have my client move Heaven and earth. We finally prevailed, but it was a nightmare.

  • Wrona

    Erika, when I moved to the lower 48, someone asked if I spoke English, in addition to requests to see my passport, how was customs, and what was different about living in the US.

  • Erika

    Best (saddest) commentary so far by a tourist to Alaska? (My family and I collect them) A lady complained to me that she visited the rainforests in SE Alaska and didn’t see any gorillas. :-)

    Although not geography related some other good ones – “Are moose born with antlers?”, “How long does it take a deer to grow into a moose?”, “What time do you turn on the Northern Lights?” and – while standing on the deck of a friend’s charter boat in Seward – “How far are we above sea-level?”

  • Ed

    Perhaps someone needs to send this page to the credit card company:
    http://www.infoplease.com/ipa/A0108295.html
    And if Puerto Rico is *NOT* a US territory, then why do we have a US quarter for it?
    http://www.statequarterguide.com/2009-puerto-rico-quarter/
    I mean, if it’s on the money, then it’s part of the country, right?
    Ed

  • MrsKruse

    Charles Schwab also doesn’t charge FTFs.

  • Ames

    The county courthouse for Queens (a borough of New York City) is in an area called Jamaica. I was informed when I attempted to get a marriage license in Philadelphia that my divorce decree (from Jamaica, New York) was from a foreign country and that I must submit a certified English translation with it.

  • Henry Mensch

    actually, while this sounds messed up, it actually makes sense … the key is “unincorporated territory.” that means, effectively, that it *isn’t* part of the united states of america wikipedia does an ok job of explaining how this happens here: http://en.wikipedia.org/wiki/Incorporated_territory …

    still, the international transaction fee stuff has gotten out of hand–i’ve had transactions originated in california assessed this fee … last i checked california was still part of the u.s.

  • larry bradley

    Carver, I agree with you on Capital One. I used to use one of their cards whenever I traveled outside the U.S.. Then one time I was in NYC watching the local news in my hotel roomand a local reporter was doing a story on a doctor with a Capital One nightmare. On a day he was doing surgery and could prove it, someone charged $6000.00 to his Capital One card. When he tried to dispute it, they denied the charge back and took him to court even though he could prove by hospital records that there was no way he could have been where the charge took place. I immediately dumped the Capital One card and got the Charles Schwab Visa which also has no international transaction fee and also has 2% cash back.

  • SpotLight

    I have momentarily had the experience of not knowing where I was.

    Many years ago, after moving to Texas, I took a Southwest flight from Love Field (Dallas) to Harlingen, TX. Harlingen is down near the southern tip of Texas. The flight, with an intermediate stop, takes 2.5 hours or more.

    I remember walking out of the Harlingen airport terminal, looking around, and thinking “there sure are a lot of Texas tags on the vehicles here.” Duh.

    Two and a half hours of flying will take one over a lot of states, except in Texas.

  • http://www.isasbread.com isasbread

    When I was in the Army Reserve station in Puerto Rico we received our pay as if we were at international deployment. When we have the annual training at any state, the pay were less, we went to Germany 6 times and the pay was the same like in PR. The fee that business have to pay to the banks for procesing credit card are high, and the banks here have the right to ask any fee and then the banks that issue the credit cards have to pass the bill down to the owner. Now if you are a small business here its almost impossible to accept credit cards or ATM. Bastards, I dont like the banks in Puerto Rico, I prefer the cooperative bank type.

  • Jasper

    @ Erika: Speaking of ridiculous money exchange questions. When I transfered some money from my Wachovia account back home to Europe, I was asked what kind of euros I wanted. I could choose from German, French and Belgian ones. Dutch ones were absent. I looked on the computer screen and the different options were really there. I told her, I’d take French ones, but only if she’s do them from Virginian dollars. She was not amused.

    Wachovia, by the way, is also the bank that can not *take* foreign transactions after 2 (or 3) pm because their international transaction computer system goes down. They would not even take the transaction on paper. This was at the Wachovia branch next to the White House and one block from the World Bank and the IMF, not some backwater branch in the middle of nowhere. Wachovia is also the bank that can not explain why I always get $50 less on the European side, than I sent. It’s not their fee, cuz that’s $35. Neither is it the incoming banks’ fee. That’s a couple of euros.

  • PANAMAGUY

    So if an international transaction fee is added to credit purchases in “foreign” countries due to currency conversion, what about countries, such as Panama, Ecuador, which uses the US Dollar as their official country’s currency? For what reason, then, is there a “conversion” I suppose the Northern Mariana Islands, USVI, and American Samoa would be considered a foreign destinations even they too are US territories. And the corporate minds who make these decisions: do they accept the fees should they use their credit cards in US territories. I hope they apply it to themselves as they do their cardholders.

  • Mark

    I try to use my debit card when possible with international transactions. One of my banks charges 1%, and less if the international transaction stays in US dollars. Another local bank has a “relationship account” with a high balance that has no foreign exchange fee at all on their debit card. I do have to call the bank ahead of my trip to tell them I’ll be making international transactions, and there are daily transaction limits that force me to use the credit card for very large amounts. I might be losing some protection in disputes although that’s never been an issue. But I have saved a lot of money in fees this way.

    Another way to save on hotels: I found Agoda.com makes prepaid reservations (often low priced) worldwide, and the transaction stays in the US and in dollars, so no extra fees.

  • Edward

    Don’t forget U.S. Service members who live overseas supporting the U.S. and have to make purchases on the local economy. They constantly get charged with the transaction fees. Any thoughts about them?

  • Jeremy

    Jasper, regarding the “French euro” or “German euro” question – it sounds like you’re doing an international wire transfer, in which case there is indeed only one euro. But if you were exchanging for paper currency, it is indeed possible to get banknotes from the different countries, as each major country has its own central bank that “prints” the currency, backed by the European Central Bank (ECB). The notes are similar but there are distinct design differences. Of course, all euro notes are accepted in all locations regardless of origin. (There has long been a similar situation in the UK, where Bank of Scotland issues its own notes that are distinct from the English, but it’s still the same pound sterling.)

  • greg n.

    I have to agree with the kudos given to Capital One. I’ve traveled all over the world with that card and have never been charged a penny for overseas transactions, from South Africa to New Zealand, no matter what the currency or country. They are the only card I use if I have to charge something overseas.

  • A Traveler

    Dont’ even bother talking to the banks. File a complaint at occ.treas.gov and with the ftc.gov.

    The banks won’t talk to you or they’ll just give you the run around unless you file a complaint. Plus, if they get enough complaints, they may actually do something.

  • marc

    How is an international transaction fee for a multinational corporation like Visa understandable? There is nothing that warrants a transaction fee on a purely electronic transaction. The cost of transacting approaches zero more each and every day. How much does it cost to have a program multiply a foreign currency amount by the exchange rate?

  • John

    Jeremy: All euro notes are the same except for the first letter of the serial number number. Only the coins have a national side, a Belgian coin may have an image of their king while a German coin has an eagle and a French coin a shield with the national motto.

  • Clifford

    For a company to deliberately add “International whatever charges” to the card for being used in PR, a part of the US, US $, etc. is just BEGGING to be sued! There has to be something about interstate commerce or something, besides just plain common sense, which appears no to be so common.

    They will back down, eventually, but the bad will will last.

    I am starting my campaign against them on Monday. Al Sharpton and Jesse better get involved as there seems to be a minority involved. All the Democrats looking for the Hispanic vote will be on board, except those receiving CAMPAIGN “DONATIONS” from the credit card lobby. The 5 Puerto Rican elected Reps are going to have a FIELD DAY with this one.

    Stay tuned.

  • Pingback: An “International Fee” when traveling to foreign destinations. Like Puerto Rico « The Daily Consumption

  • Randy

    I used to live in New Mexico and had several issues over the years with people thinking I was making international purchases. I say this because it may not be the Puerto Rico destination that was the issue, but rather they knew that PR was US territory, saw New Mexico as the origination point and thought that “Mexico” to PR would be international. I don’t know why people aren’t aware of the name of the 50 states, but many still ask me if I had to learn to speak Spanish when I moved to Albuquerque!

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