Abroad, See How The Fees Translate

American Express charges 2 percent, as it has "for decades," said AmEx's Desiree Fish. "We take whatever the [exchange] rate is and increase that by 2 percent," she said. "We don't do the dynamic conversion."

Visa, MasterCard and their banks could, of course, simply treat dollar-denominated transactions as if they were U.S. transactions, but some in the industry say it isn't that simple.

"A lot of credit card fraud is associated with international transactions," said Nessa Feddis, senior federal counsel at the American Bankers Association. In addition to the losses these generate, the card associations spend large sums devising ways to combat fraud, she said.

The result of all this is that U.S. cardholders planning to travel abroad need to educate themselves on their cards' terms and fees -- and perhaps do a little shopping around if they don't like them.

Both Visa and MasterCard require that merchants offering dynamic currency conversion spell out all their charges, so the cardholder can understand them and perhaps compare that cost with allowing the purchase to go through in the foreign currency and be converted by Visa or MasterCard.

But if they do accept dynamic conversion, will they be charged by their own bank anyway? Some of the disclosure notices sent by issuers aren't models of clarity.

For example, one recent notice put it this way: "Transaction fee for purchases made in a foreign currency: 3 percent of the amount of each foreign currency purchase after its conversion into U.S. dollars." Conversion by whom? One might assume that if the holder of this card allowed dynamic currency conversion, and the transaction was thus transmitted by the merchant's bank in dollars, there would be no fee.

Another issuer says: "International Transaction: 3 percent of the U.S. dollar amount of the transaction, whether originally made in U.S. dollars or converted from a foreign currency." That suggests you will get charged 3 percent on any transaction abroad, and if you opt for dynamic conversion, you'd be charged for that, too.

Given that uncertainty, officials of Visa and MasterCard and other experts all recommend you call or visit the bank that issues your card and ask specifically what you will be charged on a foreign transaction in a foreign currency and a foreign transaction that's converted into dollars. And if you're going to a country where dollar-denominated transactions are common anyway, ask about that, too.

Depending on what you're told, you may want to shop for another card or perhaps use American Express.

Then, armed with what you know about your bank's fees, you can, if offered dynamic conversion, compare that cost with letting it go through in euros or whatever.

For example, said Nilson's Robertson, if your issuer charges 3 percent for foreign currency transactions but there is no fee on those in dollars, you know that "should you refuse dynamic conversion, you are going to pay 3 percent. So you have to comparison-shop. If the merchant charges 2.5 percent [for conversion] then you know you're [half a percent] ahead" by agreeing to it.

The good news is that credit cards do remain one of the best deals in currency conversion available to the ordinary traveler.

Consumer Reports, the magazine of Consumers Union, recently compared a credit card, even with a 3 percent fee, with getting cash from a foreign ATM or an exchange shop or foreign bank, using traveler's checks or changing money at a hotel or airport, and found the credit card remained the least expensive way to go.