How to Avoid Being Fleeced When Using a Credit Card Overseas

If you travel overseas, be warned: Pickpockets really are out to get you.

I don’t mean the light-fingered thieves who try to grab your wallet. I am talking about digital pickpockets: hotels, restaurants and shops that systematically overcharge foreigners who use credit and debit cards in their establishments.

A few weeks ago, my family ate at the café at one of India’s most famous tourist attractions, the lakefront City Palace in Udaipur. The waiter ran my Visa card, added 5 percent to my bill and gave me my charge receipt in dollars. When I protested, the manager professed ignorance and showed me how the machine did it automatically.

The tool used to nick foreign travelers goes by a fancy name — dynamic currency conversion. But its premise is simple: foreign merchants add a stiff markup to your bill, convert it to your home currency, then claim it benefits you.

In the City Palace case, the restaurant did not ask for my consent, which is required by both Visa and Mastercard. Unfortunately, this strong-arm approach is becoming more common.

As an American journalist who lives in India and travels frequently to other countries, I have seen businesses from neighborhood drugstores to hotels in the Marriott and Hyatt chains try to dupe me into paying their high currency fees.

Here’s how to avoid being fleeced.

Insist that charges be run in the local currency

Most of the time, when you make a charge overseas, the amount is sent to Visa, Mastercard or American Express in the local currency. The card networks convert the charge into your home currency at a wholesale rate and send it your bank, which might tack on an additional foreign transaction fee of 0 to 2 percent, depending on the card.

So if you charge a hotel room for 7,100 Indian rupees, or about $100 at current rates, it should show up on your statement as $100 or $102.

However, in a bid to make more money from travelers, many businesses have programmed their card machines to present foreign customers with a choice: Do you want to process the charge in the local currency or your home currency?

They tout this dynamic currency conversion as a convenience to you. But the merchants rarely disclose that you are paying them an extra fee of 3 percent to 8 percent, sometimes more, bringing the cost of that Indian hotel room to $105 or $110.

“It is a complete scam,” said Alexander Bachuwa, a frequent traveler and consumer lawyer who practices in New York, lives in Puerto Rico and writes the Points of Life travel blog. He advises using a currency app on your phone to estimate charges instead.

Just say no to conversions. Always pay in the local currency for the lowest cost to you.

Check your receipt for unauthorized conversions

Often, you don’t get a chance to say no, despite Visa and Mastercard rules that say consumers must be offered a choice if a merchant does currency conversion.

The giveaway that you’ve been hit is when the charge slip lists an amount in your home currency with microscopic print that claims you gave consent.

In India, this maneuver is common at higher-end hotels, where a bill can easily run $1,000 and an extra 5 percent fee is $50.

When the J.W. Marriott in Kolkata initially charged a May stay in dollars despite my request to pay in rupees, a manager explained that the hotel’s systems were set up to automatically add the markup and do the conversion. To run the charge in rupees without the markup, she had to reprocess the payment on a special machine. (Marriott declined to comment, as did Hyatt, another chain where I have seen such automatic conversion frequently occur.)

Banks, which share the extra fees with merchants, appear to be complicit in this fee extraction. When a currency markup suddenly appeared last month on a charge slip from my Mumbai car service, the finance manager said that his Indian bank, Axis, had upgraded his swipe machines, added the fees without his knowledge and was keeping the money.

Axis, which was also the bank for the City Palace in Udaipur, said it offers merchants two types of swipe machines, including one that automatically adds a fee and converts the charge to the customer’s home currency. With that machine, if the customer insists on paying in rupees, the clerk has to go through a convoluted process to redo the transaction.

Sanjeev Moghe, the head of cards and payments for Axis, said that merchants are supposed to allow customers to choose their currency. But he acknowledged that many cashiers might not know how to do that. “We may review this and make some changes,” he said.

Visa said that it requires banks or merchants that do currency conversions to offer customers “an educated choice.” However, it declined to discuss how it detects violations or what action it takes in response.

Mastercard, which markets its own dynamic currency conversion service to merchants to help them make more money from customers, did not respond to a request for comment.

Fight back against deceptive charges

If you are charged a foreign currency fee without your consent and the merchant won’t reverse it, make sure you write on the charge slip that currency conversion was rejected. Then file a dispute with your credit card company.

Big American banks like Chase get so many of these complaints that you can file them online in just a few clicks. Small overcharges are usually refunded instantly. Larger sums might take longer, but I have never had any bank ultimately decline a currency overcharge claim.

If you want to see exactly what the bill should have cost in your home currency, you can use online calculators from Visa and Mastercard.

For companies like hotels and restaurants, you can also expose their bad behavior on review sites like TripAdvisor. That warns other travelers and sends a message to management that customers are paying attention.

Just use an American Express card

American Express runs its own payment network and does not allow merchants to do dynamic currency conversion.

“The reason for this is that we know some consumers have expressed confusion over fees that are charged by other providers of the service,” Molly Faust, an American Express spokeswoman, said in an email.

With many types of Amex cards, users pay no foreign transaction fee, and with others, it’s 2.7 percent.

That’s true convenience at a fair price.

Vindu Goel is the business and technology correspondent for The Times in Mumbai.

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