Beware Credit Cards Charging Foreign Transaction Fees On Domestic Purchases

Banks are increasingly charging foreign transaction fees on domestic purchases, a dangerous practice that’s likely to expand as banks look for new ways to generate profit. Tripso tells us the story of Sunil, who bought tickets with Qatar airlines, which sounds ever so expensively foreign. Citi charged a 2% foreign transaction fee, even though the tickets were bought in U.S. dollars and processed by the airline’s central reservation system based in Washington D.C.

Expedia’s customer service team researched this case, and found that Expedia submitted the round-trip amount ($1,468.80) to Qatar Airlines as a U.S.-based purchase. Qatar Airlines verified that they processed the charge via their central reservation system based in Washington D.C. The customer’s credit card company, Citibank, then charged a foreign transaction fee in line with its cardholder agreement with the customer.

It is Expedia’s assessment that the customer’s credit card company is charging a fee, likely because Qatar Airlines is not a U.S.-based company, per its cardholder agreement. Because the fee was not charged by or Qatar Airlines, neither Expedia nor Qatar Airlines has the authority to reverse this charge.

By this logic, I could get charged a foreign transaction fee by doing business with any non-US company, even if the charge takes place in the United States. If I buy a Sony camcorder or a set of Henckels knives – ding! – there’s two percent!

Does this seem fair to anyone?

Warning! Foreign transaction fees are popping up everywhere [Tripso]
(Photo: malpo90)


Edit Your Comment

  1. TechnoDestructo says:

    Does anything any credit card company does to anyone anywhere nowadays seem fair to anyone?

  2. H3ion says:

    If they have to do a currency conversion, then I understand it. If they don’t, then it seems like a ripoff.

  3. henwy says:

    It only sounds fair if you agreed to it as per the cardholder agreement.

    • Charles Duffy says:

      @henwy: Whether it’s fair even then is up for debate. To be sure, the agreement gives them the right to collect such charges — but was it fair to include such terms in the standard-form agreement in the first place?

      Not everything is fair just because one has a legitimate right to do it.

    • Tim says:

      @henwy: Yes, but how is it fair to charge a foreign transaction fee if the merchant processes it domestically? For the bank, how is that any different from processing a transaction with a U.S. company?

      Think for a moment about what purchases could be charged as foreign: a coffee at Tim Horton’s, a Swatch, gas from a Shell station (or BP, for that matter), mail a package through DHL, Legos at a Lego store, insurance from Prudential, it goes on.

      • Matthew Berkhan says:

        @TCama: To be slightly fair it’s possible they charge the foreign transaction fee if the business doesn’t have a US headquarters. Many non-US companies just have offices in the US, and other actually create a US division, like Sony Corporation of America.

        However even then it’s still crap. What’s next? Will Citi move it’s payment office to Canada and then charge everyone a 2% foreign transaction fee when they pay their bill?

        • Tim says:

          @Matthew Berkhan: Now that I look at it, Shell has a U.S. subsidiary, as does BP. But you could hash out differences with subsidiaries, divisions, units, offices, headquarters, etc. until the cows come home. The point with all of this, and with Qatar Airlines, is that if a company can process credit card transactions in the U.S., in USD, I don’t see how that’s any different for the bank than a U.S. company.

        • floraposte says:

          @Matthew Berkhan: Shh! You’re going to give them ideas.

          I suspect with the CARD act coming in they’re going to be creative in their search for new revenue.

      • henwy says:

        @TCama: And it all depends on what the line is. Check below for instance. If it were listed that every company without a HQ in the US or something along those lines got a fee, then at least it’s following a set standard. Not to mention, look at the comment above. The information is readily available.

      • Powerlurker says:


        Umm, Prudential Financial’s is incorporated and their world headquarters is located in Newark, NJ. They are in no way, shape, or form a foreign company. If you’re thinking of Prudential Plc, the British corporation, that’s an entirely different and unrelated company.

    • Skaperen says:

      @henwy: Yes, if the cardholder agreement specified an additional fee for a foreign transaction, and it was indeed a foreign transaction which requires the additional processing that justifies the fee, then sure, it seems fair. But when the card company is trying interpret a domestic transaction through entirely domestic channels as foreign, then it falls somewhere between corporate irresponsibility and outright fraud.

      • henwy says:

        @Skaperen: What you claim is a domestic transaction may not be according to the agreement. That’s why it’s best to read and do a little research. If it said we only charge a FTF if the transaction is done in non-dollars and they still charged someone like the OP, then that’s bullshit and a flat-out lie/ripoff. If it’s something different, then it’s something different.

  4. nybiker says:

    “Fair cardholder agreement” = “military intelligence.”

  5. SabreDC says:

    “If I buy a Sony camcorder or a set of Henckels knives – ding! – there’s two percent!”

    I think all this is BS (the way Citi handled it), but that analogy by the OP is pretty weak. When you buy a Sony camcorder, you are doing it through a retailer, presumably an American one. Even is a subsidiary of Sony Style, their retail stores in the US, which is a company of Sony Corporation of America. You aren’t buying from the Japanese Sony Corporation. Whereas, when you book through Qatar Airlines, you are doing business directly through the foreign country. Since their payment processing is in the US and there was no necessary currency conversion, I think Citibank is in the wrong, but my point is simply regarding the analogy that the OP used. I’d fight this one if this were me (although, admittedly, I haven’t read the cardholder agreement, so my fighting it might be useless).

    • RedwoodFlyer says:

      @SabreDC: Actually, no, you’re doing it through Qatar’s US office – similar to a retail store like Sony Style. The credit card company is cutting a check to a company in the US, which uses the dollars to pay for fuel here in the US, wages in the US, and part of their aircraft lease purchases – it helps protect them against wild swings in the value of the dollar since oil and jets are priced in dollars worldwide.

      As far as the credit card company is concerned, this is really no different than buying a ticket on jetBlue or Virgin America, except they’re being asshats.

    • gaberussell says:

      @SabreDC: As I eluded to in the post I apparently wrote at the same time as yours, below – it’s not unreasonable to expect that when you’re buying something from a foreign company with offices and operations in the USA (Qatar Airlines has offices in Chicago, NYC, Houston, and DC), that the transaction will occur in USD without any sort of foreign transaction fees.

      Besides, the actual transaction seems to be with Expedia. I don’t think it’s clear that Expedia is just handing the billing info over to the airline, rather than processing the charge themselves and reimbursing the airline later.

    • Tim says:

      @SabreDC: The point is that if a company can process credit card transactions in the U.S., in USD, how is that any different (from the bank’s perspective) from doing business with a U.S. company?

      • SabreDC says:

        @TCama: It’s not, which is why I said I disagree with it if there was no currency conversion needed.

        @RedwoodFlyer: Is Qatar’s US office an actual US incorporated entity like Sony Corporation of America? Or is it a foreign company with an office in the US?

    • Nogard13 says:

      @SabreDC: Maybe the OP can test the theory by purchasing something in Target (they are a French company, not American). If he gets charged the 2% fee then at least they are being consistent.

  6. gaberussell says:

    With so many multinational corporations, is it Citi’s choice as to what companies are considered foreign? Like the OP implied – Sony is based in Japan, but has headquarters and operations in many countries. Which purchases are subject to fees? What about American companies that are held by foreign ones? Hell, Budweiser is foreign-owned now.

    Seems that this should really be a function of currency and location of the sale, not the pedigree of the company involved.

  7. Anonymous says:

    I think a foreign transaction fee should only be charged if the recipient / vendor wants payment in a non US currency. However, the credit card companies are going to gouge us for every dollar they can. Banks are also doing it!

    I purchased a round trip ticket for my aunt on Quantas on their web site (Austrailia to US) and paid using my checking account. Qantas charged me a foreign transaction fee, as did my bank, Bank of the West.

  8. William Brinkman says:

    Dear Citibank. If I go to Ikea, will I incur a foreign currency charge?

  9. Anonymous says:

    The same thing happens to me when I purchase TomTom maps. TomTom is a Dutch company, but their US operations are based out of Concord, MA. I always get charged a fee for buying maps, even though the transaction is in US$ and my invoice has their US address on it. The bank claims it’s because the maps are downloaded from servers which are physically located outside the US. There’s no indication anywhere from TomTom that this is the case, and no “you may be charged a fee” note from them either. The fee is relatively small, but it’s still pretty annoying.

    • Megalomania says:

      @ZahraCrane: It doesn’t matter what you pay for, it matters who you pay. You could pay best buy for a TV and they could ship it to you from Japan and it doesn’t make a difference to the bank, and that’s a pretty extreme example compared to arguing about the physical location of servers. Besides, I doubt Tomtom doesn’t have a US datacenter anyhow.

    • Kyle Kienapfel says:

      @ZahraCrane: you should complain to TomTom about this.

      I think its where the money goes that matters. For example, the CC Processor deposits to a Dutch account.

  10. twophrasebark says:

    This is probably illegal.

    I doubt the cardholder agreement says they will charge a fee for completely domestic transactions connected to a foreign company.

    What the TOS probably says (and always says) is something along the lines of “we reserve the right to do whatever we want and you use reserve to try to sue us for misleading you.”

    What follows next is a class action lawsuit. Then someday maybe legislation.

  11. Anonymous says:

    Citi has done this with me for putting more skype credit on my account. I’m not sure where Skype is located (in the cloud?) but the credit is denominated in dollars so wtf? I remember when it was denominated in foreign currency (was it pounds? euros?) when it first started, but that was a long time ago. Isn’t it owned by Ebay now? a US company?

    • catastrophegirl chooses not to fly says:

      @SukritiAnteater: aside from the fee being ridiculous, there’s always the possibility that it could be worse. they could charge a foreign transaction fee for each country involved in the history of skype:

      their headquarters are:

      Skype Technologies S.A.
      22/24 Boulevard Royal, 6e etage, L-2449 Luxembourg
      Trade register number: R.C. Luxembourg B96.677
      VAT number: LU 20180441

      but the original programmers were estonian, the founders were swedish and danish and they have offices in several countries.

      • Megalomania says:

        @catastrophegirl – manic first time home buyer: Skype is a wholly owned subsidiary of Ebay; however, it is headquartered in Luxembourg. You’re getting billed for the same reason that the OP was; the company pays taxes to another government.

        • catastrophegirl chooses not to fly says:

          @Megalomania: actually i have skype but i don’t get charged a foreign transaction fee. unlike SukritiAnteater, i don’t have any accounts with Citibank.
          The only time my credit union charged me a foreign transaction fee was when i was actually IN Belgium making a purchase. and they only did it on one of three card transactions i made there [mostly i paid cash]

  12. tape says:

    utterly bogus.

  13. jasonorl says:

    I just checked the cardmember agreement for one of my credit cards and it seems to say that the foreign tranaction fee applies if the transaction is done in a foreign currency.

    For instance, I made a online purchase from a foreign company in the past but it was all done in euros (the advertised price was in euros and so was every step in the process) so I was well aware that it was a foreign transaction. I would take issue with a company quoting a price in US dollars and then getting hit with the foreign transaction fee if they did not disclose that it was foreign transaction upfront.

    Does you receipt show the transaction amount in US dollars or in another currency? If it shows the transaction amount in US dollars then I would be interested to see your credit card company’s explanation after you mention this fact.

  14. azntg says:

    Looks like Citi is desperate to open themselves up for a class action. Sad news is, the majority of the beneficiaries will get very little in class actions and oftentimes, the company will officially admit “no wrongdoing” even if it’s blatantly obvious that they’ve effectively been caught doing so.

    Any other major banks want to take a shot at this?

  15. t325 says:

    Alright, so if the foreign transaction fee depends on where the company is headquartered, answer this question for me Shittybank (or in my case, Chase): When I stayed at a Holiday Inn in Germany, why was I hit with the FTF when Holiday Inn is a US based company?

    And by Citi’s shitty logic, it seems like anyone who uses their credit card to pay for service at a Honda, Toyota, Kia, Volkswagen, Nissan, BMW, etc, dealership in the US should pay the FTF.

  16. MumblesFumbles says:

    American Express… they only charge you a fee if it’s a foreign currency.

  17. FreemanB says:

    I got hit with a foreign transaction fee when I purchased something on Ebay. First, I was given the runaround about who actually charged the fee, but my bank(Wachovia, which is no longer my bank) eventually admitted charging it. Unfortunately, they didn’t quite seem to understand that Paypal was not a foreign country, and that was who I actually paid money to. They never had any contact with a foreign bank, a foreign currency, or anything else that could be considered foreign. If there is a foreign address involved in the transaction(Apparently it was in the info they got from Paypal), then they charge the fee. I thought about fighting it, but fortunately, it was only a grand total of $0.02 charged, so I decided it wasn’t worth the effort at that point. But if others are getting charged now on flimsy pretexts, then they are definitely setting themselves up for a class-action lawsuit.

  18. henwy says:

    @Charles Duffy:

    I think so. But then again, I always read and research my card agreements so I know going in what the deal is. It’s not like the information isn’t easily available and most time syou don’t even have to read through the legalese. The Consumerist has listed, a couple times, cards that don’t charge these fees even when abroad for instance. So have many other sites. It doesn’t take much just to check.

  19. Julia789 says:

    I was surprised when my kid’s monthly subscription to Disney’s “Club Penguin” game was charged a foreign transaction fee every month.

    It’s only $0.20 a month but it’s just weird. Disney is an American company. Apparently the Club Penguin servers are in Canada, they said when I called? But my kid loves the game, it’s cute and safe and I can set their automatic parent timer on it so he only plays a couple of hours a week.

  20. haoshufu says:

    I think it has something to do with the credit card processor. If the proessor is not US based, you get charged the fee, regardless of where the company is based and what currency.

  21. INsano says:

    I’d like to have 2% of all transactions of Chinese goods in the U.S.

  22. BrendaNerq says:

    When transactions are processed, each one has a country code associated with it. If the country code on the issuer (the cardholder) and the acquirer (the merchant) are not both 840 (US country code), VISA charges the issuer a 2% foreign transaction fee. The bank (the issuer) then passes the fee along to the cardholder as a 2% or 3% fee. MOst likely, the authorization came through for the Quatar Airlines, which has a different country code than 840. This is why the fee was charged. I work for a financial institution, and hear the same complaints, but it is what it is. The bank is charged a fee and passes it to the customer, sometimes adding 1% to make a profit.

  23. misterfuss says:

    Oh great. I just charged my French toast and Belgian waffles at the International House of Pancakes. I am so screwed…

  24. jp7570 says:

    With the new CARD act slated to take effect in the US, expect more of these shenanigans. Face it – banks and those in the financial sector are now no better than common thieves.

  25. CrazyMann says:

    Same problem here with US Bank. Tuneup utilities is bought with Dollars their address is in Chicago, the parent company is in Germany. We need to know before we place any order if a fee will be charged.

  26. krispygale says:

    I just had this issue with my bank. I bought books online from a seller in Florida and they are trying to tell me the order was processed through Canada and tagged on an extra fee. I bought the books online and the order/charge was processed within the US. It was only a small charge, but this is ridiculous and just another way to wring money out of consumers.

  27. jvanbrecht says:

    This is crap, the foreign transaction fee is supposed to only be applied to transactions in foreign currency.

    So what if the company is not a US based company, headquartered or not, it makes no difference. When you purchase something in dollars, and it is processed in the US, there should be no FTF, the company you are buying an item or services fund in the end will pay the fees if they decide to move the USD to their own foreign currency.

    This is just banks double dipping, charging at both ends, which is utter crap.

  28. jvanbrecht says:

    err “from” not “fund”

  29. bilge says:

    Fly Etihad!

  30. aerick79 says:

    Well. The Foreign Transaction fee is charged by visa, but they only require to charge 1% of the foreign tans. It’s up to the bank if they want to charge more, and most banks do.

  31. AustinTXProgrammer says:

    We need to start opening customer service inquiries with Citi for each nickle and dime internet purchase before completing the transaction. The costs to answer all of us could outweigh charging the fee in a seemingly arbitrary manner and cause them to change their policy to a clear one.

  32. ogunther says:

    I just noticed one of these charges on my BofA card today. The product I purchased was a renewal of a software license from an online company that makes no mention of being foreign and has no option other than to pay in US funds. Complete BS! When will the credit card companies learn to treat their clients with respect and quit trying to nickle and dime us? Bad on me for ever using them; lesson learned.

  33. Anonymous says:

    I got charged $54.67 for three tickets to London on British Airways. Citi changed the terms on my statement in January in regards to the foreign transaction fee, unknown to me. I complained and threatened to close the account. Only got 3500 bonus points for keeping my card. However, after complaining to British Airways, they are sending me a check for the FTF charged by my credit card. Stand up compainy in my book.

  34. peteyale says:

    so what about if i eat at a mcdonalds or starbucks outside of the U.S? Can I not pay the fee?