Why do banks charge 3-3.5% on foreign credit card transactions?

Morning all.

Why is it that us australians get charged between 3 and 3.5% for foreign transactions made overseas on our credit cards? It seems very unfair as I noticed that the american chase sapphire preferred credit card does not charge such a fee. Is this just another case of the australian consumer getting a raw deal?

Ausbt reviewed 2 credits cards last year that don't charge the fee.  One was GE and the other BankWest.  You don't get the same points earn, so it's a case of minimum cash or maximum points.

It's fair to say that one bank does it because another bank does it.

Banks charge consumers 3-3.5% on foreign transactions, but also usually charge the merchant that actually processes the transaction a higher fee than for a 'local' credit card (also often in the range of 2-3% but varies between banks and countries).

So, if you use your credit cards overseas a lot, you should be a very profitable customer for the banks! :P

BECAUSE THEY CAN  ............. not becasue they should or need to.

Whilst there is a large element of truth to the above comments, you need to keep in mind that the banks pay a higher fee for processing such transactions as the payment approval process is more complex more payment gateways and switching means more companies clipping the ticket!

Because they can.

"Beware Will Robinson", er DLS1976 !

It isn't *just* credit cards - this also applies to your own cash which you may draw from your bank account via your debit card (even using 'preferred' partner banks' ATMs) as well as certain third party issued airline and travel industry "cash cards".

Short answer - as shown above in numerous posts - is ... because they can - and it's an 'easy' touch. As stated, shopping around for appropriate cards can often save you a significant amount of money on something the banks know you won't notice until you return from your shopping spree.

And why city counsil charging so much rates? Answer is the same and obvious - they screw you just because they can.

Everyone takes a bit along the way. Visa and Mastercard charge the banks around 1% for doing it, and the banks add a bit an on charge.

If you want to use a card overseas, find one that doesn;t charge the fee. As mentioned there are few such as the 28 degrees card and Bankest Platinum Cards.  A recent addition to that list is the latest incarnation of the Coles Reward Mastercard....