New foreign transaction fees on Bank of America cards
Bank of America seems to be looking everywhere they can to find new service charges they can make to increase their revenue. I guess that government bailout money wasn't enough.
Most credit (and also debit) cards (Capitol One and Charles Schwab seem to be about the only exceptions) have a "foreign transaction fee," which is a percentage of the purchase price that is levied as a fee for converting puchases made in foreign currency, such as Euros, to Dollars. The Bank of America fee is 3%.
Now, however, Bank of America has started charging the foreign transaction fee even on purchases in U.S. Dollars that are made outside the United States. And, you don't have to travel anywhere to incur this fee! For example, if your web hosting provider is located in Canada, you will be charged the fee, even though the company bills your credit card in Dollars.
The new Bank of America terms and conditions would also appear to include a charge of 1% on any currency withdrawals that you make on your Bank of America check (debit) card at a foreign ATM -- even perhaps at ATMs in Europe that are part of the so-called Global ATM Alliance. The Global ATM Alliance, of which Bank of America is a member, is supposed to guarantee no-fee withdrawals at foreign ATMs of participating banks. In Europe, those banks are Deutsche Bank (Germany branches only), BMP/Paribas (France), and Barclay's (UK). In the past, there have been no fees at all charged to Bank of America customers to withdraw Euros (or Pounds in the UK) at these banks, but a foootnote to the bank's new terms and conditions says that you may even be charged this fee at Global ATM Alliance banks.
Tyler
San Francisco, California USA 7/4/09
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Tyler, you have it right. I believe more and more banks will start looking for every penny they can get. Afterall, we have to help them make up the losses they incurred by making billions of dollars in bad loans as well as millions of dollars in bonuses paid to executives who helped them lose that money. All the banks paid "retention" bonuses. The more money you lost for the company, the higher your retention bonus.
B of A, especially, needs the money to make up for absorbing the losses when they bought Countrywide and Merrill Lynch.
Sounds like a good time to get a Capital One card. Since I got mine I don't ever use anything else. AMEX used to make a sizeable profit from me, but not anymore.
Thanks for the heads-up on this Tyler. Looks like I leave my B-of-A card at home when I head to Italy and just take my Capitole Uno.
I wonder if it would be better to obtain euros from BOA before departing instead of relying on ATMs (Barclays) with fees. BOA charges $7.50 just for ordering euros (any amount). I have a Capitol One credit card but one needs cash. I haven't done the math. I ordered a small amount of euros last week for a birthday gift --- maybe I should have ordered more plus the exchange rate is getting higher. Any thoughts?
I don't think this is a new thing. The fee hasn't been a "currency conversion" fee for several years - it's now a "foreign transaction fee." It's not limited to B of A.
Of course this is all the more reason not to let your hotel/restaurant/etc. convert the Euros charge into Dollars. You know they'll use a conversion rate that's several percent in their favor, and your bank will still give you a few percent hit on top of that.
@Audrey: In addition to the $7.50 fee, look into the exchange rate that's used. Probably it will be above $1.50 per Euro. The ATM will still be cheaper.
Audrey, BofA, like other banks, will charge you 4%-5% to buy Euros here in the U.S. ATMs are less expensive.
Thanks Peter & Larry for the ATM advice even if BOA will now chargea fee even at Barclay's. The conversion rates have always been there but there was no ATM fee. Maybe I'll use my Capitol Once card more than I anticipated.
Even if the bank is now going impose a transaction fee of one percent on withdrawals at Deutsche Bank (Germany), BNP/Paribas (France), and Barclay's UK, the favorable exchange rate you will get at these ATMs, combined with the fact that there are no ATM withdrawal fees, still makes it a lot cheaper than buying Euros from Bank of America before your trip.
You can use this VISA website to calculate your approximate exchange rate. This rate applies not only to credit card purchases, but to withdrawals from an ATM.
http://www.corporate.visa.com/pd/consumer_services/consumer_ex_rates.jsp
"Audrey: In addition to the $7.50 fee, look into the exchange rate that's used. Probably it will be above $1.50 per Euro. The ATM will still be cheaper."
Bank of America and Wells Fargo here in San Francisco have foreign exchange departments where you can buy cash Euros. The exchange rate, however, is about six percent over the VISA rate -- not very good. For example, if the rate you get from an ATM withdrawal in Europe (which rates are set by VISA at most banks) is 1.40 per Euro, Bank of America or Wells Fargo will charge you 1.60 per Euro.
Still more outrageous are commercial exchange bureaus, such as Travelex, which will charge ten percent or more over the VISA rate.
I have tracked the "price" for Euro from Wells Fargo for years and they consistantly charge an average of 5% over the Interbank rate. That is the price that you pay over the counter at a main branch of Wells Fargo. The Interbank rate, also called the pier-to-pier rate, is the international exchange rate you would see posted in the Wall Street Journal. It is the rate at which major banks exchange currency where no one is the seller or the buyer. The interbank rate is the result of currency auctions and varies throughout the day, depending on whether more banks want Euro or Dollars.
Wells Fargo sets their rate in the morning, and it might be more or less than 5% depending on how the currency market fluctuates during the day.
I also tracked BOA, and they seem to be about 5½% over the interbank rate.
I really have no idea by what you mean by the "VISA" rate. Visa, along with MC, Cirrus, Plus, Star, et al, comprise the "network", which pays the merchants and ATM owners in Europe in Euro and bills your bank over here in $. The network charges 1% over the interbank rate (~½% for handling the transaction and ~½% for foreign exchange). Major U.S. Banks, those with foreign exchange operations, pay the network in Euro + ½%, then charge you 3% for the exchange (nice guys).
"I really have no idea by what you mean by the "VISA" rate."
Look at my previous post, with the link to VISA's web site. That's what I mean by the "VISA rate". It's the rate that VISA says the consumer can expect to pay on credit and debit transactions. It's very close to the interbank rate.
Just great. And there's a limit to how much I can withdraw per day (I think it's still $300) with my BofA check card, so I can look forward to the per-transaction fees and now these percentages as well.
Is the ATM in Europe still the best way to go? Or should I get European money over here before I go over there? I hate to carry so much cash but these fees are getting really aggravating.
Thanks for the warning. A loyal customer for years with no debt with them and this is the thanks I get from them!
Heather writes:
"Just great. And there's a limit to how much I can withdraw per day (I think it's still $300) with my BofA check card, so I can look forward to the per-transaction fees and now these percentages as well."
It's not that bad, Heather. You've read it wrong what I said. The only change from BofA's previous policy is that they may now charge a 1% "foreign transaction fee" when you withdraw Euros in Europe. For example, say the Euro costs 1.40. With the 1% extra, you would pay 1.41. Still a good rate. By contrast, if you were to buy Euros from BofA here, in the U.S., the rate would be about 1.46. Terrible.
There are still no other fees if you use of the banks in the Global ATM Alliance -- Deutsche Bank in Germany, BNP/Paribas in France, and Barclay's in the UK.
Don't withdraw at other banks' ATMs, however. There is a $5.00 charge for that.
Look you are going to have to buy Euros/Pounds anyway while on your trip. So you just have to do it the cheapest way and that is by using a debit card. The way I look at it is to chalk it up to the cost of my trip...you cannot get around fees in any case! There is no free ride...well a few... see the following.
Besides a BOA debit card, I also have a Fidelity card which charges no fees. I have not used it in a cash machine but did use it for charges....and yup there were no fees!! Now if I had used my BOA debit as a charge card (which I can do), I would have gotten fees tacked on each transaction. If I was traveling in Italy (or other country) where there were no BOA affiliates, I would just stock up on as many Euros as possible in each transaction. Except now that I have my Fidelity card, I don't have to worry. (and other people have written about Charles Schwab and Capitol One so check those out as well
Purchasing foreign currency in this country is going to cost you a lot more!!! However, if you are leaving realtively soon (not next year!), you might buy some here from the banks as the exchange rates have been going up lately. So the increase in the exchange rate might make up for the fees. But don't count on it!!! Very professional traders play the currency exchange and you can lose a lot.
Today's Euro rates from various providers. They vary a lot!
Bank of America (ATM withdrawal at European partner banks) - 1.41
Xetrade (get Euro bank draft or wire to a bank account in Europe) 1.421
Wells Fargo (buy in USA at bank) - 1.460
Bank of America (buy in USA at bank) - 1.465
Travelex exchange bureau (order online -- plus a shipping charge!) - 1.538
Currency investing is like playing the stock market. You might win, and you might lose, and these days the volatile markets make it increasingly risky, because it’s hard to predict where the Dollar is going to go from one day to the next.
Another problem is that interest rates on all savings have plummeted since the world economic crisis began last year. A couple of years ago, I thought I was going to make some money buying a few Pounds Sterling and putting them in a UK bank account. Citibank in London was paying six percent – better than you could get at any bank here -- and they welcomed US investors. I bought 1,500 Pounds, at the then current rate of 2.00 Dollars per Pound. I figured the rate would stay at least reasonably stable, and even if it dropped a little, the six percent interest would make up for it, and I would end up having a tidy little sum to spend on my next trip to England.
Well, the first year I made about $80 on the deal, but a few months later, the Pound plummeted to an unheard of 1.45. The lowest rate in 20 years. Even the “experts” were stunned. And, because the Bank of England kept lowering interest rates, my account is now pay paying only 1.1 percent.
The only good thing is that I still have my money, and can withdraw and spend it the next time I go to London. Sure, I lost money on the deal – in terms of what the Pounds are now worth converted back to Dollars – but it’s better than the stock market, where, if the stock you buy goes bust, you essentially have nothing to show for it. So, from one perspective, currency investing isn’t quite as risky as stock investing, because at least you can still spend the foreign money you bought. But, it was a huge disappointment nevertheless.
Tyler, you missed a couple:
ATM withdrawal with almost any small bank or credit union in the U.S. that doesn't deal in foreign currency so pays the network the exchange rate plus 1% ($1.3912/€), $1.405/Euro,
ATM withdrawal with ATM card from Wells Fargo with a PMA account, $1.3912/Euro.