More on foreign-transaction fee

After sending ITN my letter about the foreign-transaction fee (FTF) imposed when I bought tickets from Aer Lingus with my Visa card (May ’10, pg. 14), I pursued the matter with Pentagon Federal Credit Union (PFCU) and learned the following.

The information linking the FTF with a currency-conversion fee was given to me in error by a PFCU representative. The FTF has no connection to currency conversion. In fact, the FTF was and can be charged where no currency conversion has taken place.

The FTF (also called an international service assessment, or ISA) is assessed by Visa for the use of its global infrastructure whenever a transaction crosses an international boundary, regardless of the currency used by the merchant.

Visa assesses this fee to any financial institution issuing Visa cards, and the financial institution then decides if it will absorb the fee or pass it on to the cardholder. Because of the discretion each financial institution has in how it deals with this fee, readers may want to check with their card issuers to learn what to expect.

I acknowledge the goodwill gesture by the PFCU board in crediting my account the amount of the previously charged fee ($116.06). The credit was given because of the unacceptably poor customer service I received in trying to get information. The fee, by PFCU rules, was appropriate.

PATRICIA RUSSELL

Las Cruces, NM

Be aware that at least two separate fees may be imposed in a foreign transaction using a Visa credit card: a currency-conversion fee and an FTF (or ISA) fee.

During a foreign credit card transaction, a merchant may convert a purchase price into your home currency. This is called dynamic currency conversion, and it is the merchant, not Visa, that decides which currency-conversion rate to use, usually using a bank rate as the baseline. Visa does require that merchants offering this service inform you of the exchange rate, including any applicable commission being charged.

Do not confuse the currency-conversion fee with the FTF fee, as explained here on the Visa Inc. webpage (click on “FAQ”):

“Visa applies International Service Assessment (ISA) fees ranging from 0.15% to 1.0% to its financial institution partners for their use of the global payment system. The fees are paid by financial institutions on transactions that require the use of our global infrastructure. Since Visa does not assess any fees to cardholders or merchants, we have no involvement in financial institution pricing to cardholders or merchants. If financial institutions or merchants decide to assess a foreign transaction fee to their customers, they are required to provide details to their cardholders and consumers.”

In other words, Visa charges the financial institution an ISA fee and then claims it is out of their hands if that institution or (the next step down) the merchant passes that fee along to the customer… or even adds on to that ISA fee.