In an important, yet widely underpublicized move, Discover recently announced the elimination of foreign transaction fees for all of its credit cards effective Nov. 6, 2011. Discover thereby joins Capital One as the only two major U.S. credit card issuers to offer only credit cards without foreign transaction fees, making them appealing choices for overseas travelers as well as small business owners who transact with foreign-based merchants.
"Discover is always seeking and evaluating new ways to offer more clear value to our cardmembers," Discover spokeswoman Kathryn Henry is reported to have said regarding the decision. "We removed our 2 percent foreign currency fee as an added convenience to our card members, so that it is one less thing for them to worry about when traveling internationally."
Foreign transaction fees are typically assessed on any transaction processed outside the United States and usually amount to 2-3 percent of the total amount being charged. According to WalletHub data, over 90% of credit cards have foreign transaction fees.
“Foreign transaction fees can significantly inflate the cost of foreign travel or international business,” said WalletHub CEO Odysseas Papadimitriou. “Discover eliminating this type of extraneous cost is certainly good news for consumers. I predict that more and more issuers will follow suit as well, not only to keep up with the competition, but because post-CARD Act transparency makes such fees more obvious and consumers seem to now be more careful about looking into the terms of prospective credit card offers prior to applying.”
Papadimitriou went on to say, “I’m just surprised Discover didn’t make this move earlier to compensate for their disadvantaged position in terms of global acceptance. Visa, MasterCard and American Express all boast more merchant locations in more countries than Discover cards.”
While foreign travelers should still be sure to open a no foreign transaction fee credit card and to compare offers across all issuers prior to doing so, Papadimitriou’s prediction would seem to fit the string of pro-consumer developments over the past couple of years.
In addition to the passage of the Credit CARD Act, which improved transparency and consumer rights in the personal credit card space, many credit card companies have begun offering lucrative initial rewards bonuses and lengthy 0% credit card offers in return for the most trustworthy consumers opening accounts. Chase has also struck a number of interesting rewards partnerships with major travel-related companies, and a settlement was recently reached in a class-action suit over alleged collusion and other impropriety in the setting and disclosure of foreign transaction fees by numerous major card networks and issuers.
At the very least, not all financial news these days spells doom and gloom.