Extra fee for "Overseas Transactions"

Yup. This is happening increasingly. Been happening for a while in the US AIUI.

Are you sure they didn't bury it somewhere in an update to T&C's cunningly hidden in what looked like junk mail?

Change to a bank which doesn't charge, eg Nationwide?

The reason for the change is the increasing prevalence of Dynamic Currency Conversion, which has hit VISA, Mastercard, and the banks' lucrative currency conversion markups. So VISA, Mastercard, and some banks, are introducing "foreign use" fees, where you get charged even if you pay in GBP abroad. I think VISA and Mastercard have reduced their exchange rate markups to partly make up for this. You may find your bank have reduced their exchange rate markup.

The one good thing that may come out of this is the death of DCC....

He said it included things priced in dollars so this doesn't apply.

tim

It does. They apply the charge to all foreign transactions regardless of currency. The bank should have reduced the foreign exchange markup, as VISA/Mastercard have I believe.

No the fact they've lost the lucratice currency conversion doesn't apply.

They get that and the new charge, so he is being well ripped off.

tim

It does, because they lose it when DCC applies, ie if/when he pays in GBP abroad.

What actually happens when a retailer overseas carries out a transaction in GBP? Does he get paid in GBP by his local bank, or does he get paid the equivalent amount in his local currency? If the latter, then presumably the conversion markup is still there.

Chris

AIUI, the transaction goes via a DCC operator, who converts the currency with a markup. He then gives the retailer the amount in the local currency with a bit of commission on top, to encourage the retailer to select the option to convert the currency. Theoretically the currency should never be converted without the customer's consent, but it often is, since the retailer benefits.

The customer's card is then charged in his home currency - meaning that VISA/Mastercard and his bank have lost out on the exchange rate markup they would otherwise have got. So that's why they are introducing foreign usage fees, as well as or instead of part of the exchange rate markup fee.