The foreign currency gouge

For years some major credit card companies failed to adequately disclose the fees for overseas transactions.
Learn more

01.The foreign currency gouge


Hidden fees on overseas transactions

Our analysis of credit card statements and foreign exchange transactions going back as far as 2002 finds that consumers of several financial institutions were charged much more for overseas transactions than the fees disclosed on their statements suggested.

This understating of charges was widespread in the industry, potentially involving millions of dollars. Few of many affected customers are likely to have known this was going on, because the extra fees were hidden in the exchange rates that were applied to transactions.

  • Until as recently as 2005 and 2006, bills and statements from some major credit card companies (such as banks and other financial institutions) understated what customers were being charged for foreign currency transactions.
  • In other countries, customers have been compensated for failure to adequately disclose fees.

Please note: this information was current as of April 2007 but is still a useful guide to today's market.

What we found

A selection of major banks’ card statements that we analysed found that up to around mid-2005 (earlier and later in some cases), customers often paid more than their bills and statements suggested. These companies’ statements didn’t mention the fees that MasterCard and Visa add to their wholesale exchange rates (the fees were 1.1% and 1% respectively), which customers were charged in addition to the banks’ fees.

A statement is the main document a consumer is likely to refer to when checking what they’ve been charged for transactions. While in some cases, contracts and letters of offer explained that the exchange rates applied were set by MasterCard and Visa, this was effectively ‘buried’ in the terms and conditions and the amount of the fee they add to the exchange rate often wasn’t mentioned.

See examples of what we found.

Overseas actions

The charging of similar hidden credit card fees has been investigated in other countries, with legal actions in the US, and in New Zealand, where some of the banks that paid record fines and compensation to consumers are affiliated to Australian banking groups. Read more about the overseas crackdown.

CHOICE verdict

 We think the Australian Securities and Investments Commission (ASIC) should investigate the disclosure of these fees and what was charged.

The incidents of poor disclosure we found may just be the tip of the iceberg. We examined past credit card statements from some of the major banks at particular points in time, but not all credit card providers and not over the full time period that this may have occurred.

We don’t know how the law in New Zealand and elsewhere compares to Australia’s (and as you’d expect, some banks maintain they properly disclosed fees). However, it’s not good enough to bury references to fees in the small print of contracts and in letters. This is true not only for cards, but for other forms of travel money including travellers’ cheques and foreign notes.

We think all costs to the consumer — whether they're labelled fees, commissions or margins — should be properly disclosed in advertising and other documents. That way you could know what you’re really paying and make better choices.

What you can do

If you’re unhappy with what you’ve been charged for overseas transactions, you can lodge a complaint with:

  • Your credit card provider.
  • The Banking and Financial Services Ombudsman (BFSO): phone 1300 78 08 08 or visit the BFSO website at
  • Australian Securities and Investments Commission (ASIC): phone 1300 300 630 or visit the ASIC website at


Sign up to our free

Receive FREE email updates of our latest tests, consumer news and CHOICE marketing promotions.