Customers Challenge Citibank Foreign Transaction Fee

Citibank is one of the largest retail banks in the United States and has branches around the globe. It provides personal and business banking services and debit and credit cards, some of which are specifically designed for frequent travelers and advertised to offer low or no foreign transaction fees.

Those foreign transaction fees are coming under increasing scrutiny though as consumers question if they can be charged for online purchases made from the U.S.

What Is the Citibank Foreign Transaction Fee?

Foreign transaction fees are surcharges on credit card purchases processed by a foreign bank or in a currency other than the U.S. dollar. That means “you’ll pay them when you travel, and may also be charged when you buy online from a seller based overseas,” according to a report on TransferWise.com, an online money transfer service specializing in international currency exchange.

The fee is composed of two parts – the first charged by the credit card network, such as Visa or MasterCard, and the other by the issuer, such as Citibank, explains Joe Resendiz, a research analyst who reports on credit cards and finance for the website ValuePenguin.com. In an article published on the site May 28, Mr. Resendiz reports Visa and MasterCard charge a one percent fee. Citibank and others in the credit card business charge different fees on different cards, and in some cases no fee at all. To find out a credit card’s foreign transaction fee, the cardholder can look at the terms and conditions of the card.

The Citibank foreign transaction fee is three percent for customers with debit cards under the basic banking packages, access account packages, and Citibank account packages, according to the company’s Marketplace Addendum. Customers with Citi Priority and CitiGold banking packages are not charged foreign transaction fees, but CitiGold requires account holders to keep a minimum balance of $200,000 to qualify.

In terms of credit cards, some of Citibank’s options are aimed at customers who travel frequently or shop online with international sellers and waive the foreign transaction fee for overseas purchases, but come with an annual fee. Other cards with no annual fee charge the foreign transaction fee.

Citibank customers with Citi Double Cash, Simplicity, Rewards, Diamond Preferred and Secured MasterCard, and the American Airlines AAdvantage Mileup, Expedia Rewards and AT&T Access cards are charged a Citibank foreign transaction fee of three percent, according to the information listed on the Marketplace Addendum.

What constitutes a foreign transaction has changed in the eyes of some credit card companies over the years. Historically, to be considered foreign, a transaction had to happen on foreign soil. Recently though, “credit card networks have begun flagging transactions as ‘foreign’ if, at any point, they pass through a foreign bank,” according to the Resendiz on ValuePenguin.com.

“This means that some purchases will count as being foreign, even if you make them while in the U.S. – for example, an online purchase,” Resendiz wrote. “And very few places will actually provide that information, making it near impossible for consumers to find out ahead of time.”

How Can You Avoid Foreign Transaction Fees?

There are several ways that consumers may be able to avoid these fees. One way is to attempt to ensure that you are only making purchases from U.S. based stores. Unfortunately, as many retailers use foreign banks to process transactions, it may sometimes be impossible to avoid being assessed a foreign transaction fee, even if you believe you are making a purchase from a U.S. based company.

If you believe that your Citibank foreign transaction fee was assessed in error, you may be able to speak with a representative from your bank about having the fee waived.

Another way to avoid these fees may be to switch to a credit card that does not charge foreign transaction fees. Many cards that are marketed as travel rewards cards do not charge these fees. While some of these credit cards do charge an annual fee, this fee may be worth it. It could end up being less than the cost of multiple foreign transaction fees, if you are a consumer who frequently shops at retailers who process transactions through overseas banks or a regular international traveler.

Are Online Citibank Foreign Transaction Fees a Violation of Contract?

Charging foreign transaction fees on online purchases is not illegal, but some banks might be violating their own contracts with these hidden fees.

A class action lawsuit filed in U.S. District Court for the Central District of California in February 2019 by plaintiff David Sponheim, individually and on behalf of others with a similar experience, claims Citibank is doing just that.

The lawsuit argues Citibank’s own account information sheets say customers “will not be charged a fee unless they are using the Citibank Banking Card ‘outside of the U.S.’” Reasonable people would take that to mean the bank won’t charge them foreign transaction fees unless they are using their debit card while in a foreign country, the suit says.

Citibank also did not inform their customers that a “Foreign Exchange Fee” could be charged if they were to engage in an online transaction, from the United States, with a foreign merchant, according to the lawsuit.

Sponheim initiated his lawsuit after he discovered he was charged a three percent Citibank Foreign Transaction fee when he purchased items online from a merchant based in Canada in 2018. The products were listed in dollars on the website and so was his total price and invoice.

The Citibank Foreign Transaction Fee Lawsuit is Sponheim, et al, v. Citi N.A., Case No. 8:19-cv-00264-JVS-ADS.

Other consumers have reported similar experiences. In June 2020, the Australian Competition and Consumer Commission (ACCC) warned Australian shoppers that even websites that include a “.com.au” domain name may still process these transactions overseas, resulting in international charges. According to the ACCC, retailers are expected to disclose these fees to consumers before they are assessed. Otherwise, these retailers may be engaging in deceptive business practices. Australian consumers who have been hit with these fees may be able to report the fee to their bank, as well as to the ACCC.

Consumers have reported being assessed these fees when making many types of online purchases, including buying brand name clothing or shoes, purchasing airline tickets, reserving spots on a cruise, or purchasing professional education courses. Travel sites, including sites for tours, cruises, or airlines, may be especially likely to process their transactions in a different country than the one the consumer is making the purchase from, due to the nature of the business. Other consumers have reported being hit with these charges after they made a charitable donation to a charity based overseas. Additionally, as many retailers operate multiple websites for each country they serve, it may be especially difficult to determine where your transactions are being processed.

Other consumers who were hit with unexpected foreign transaction fees claim that their credit card companies were not transparent about the FT exchange rate that customers were charged for these purchases, and that the rates were often higher than the best available exchange rate at the time of purchase.

How Should You Respond to Online Citibank Foreign Transaction Fees?

If you have been assessed a Citibank foreign transaction fee for purchases made within the U.S., you may be a victim of deceptive trade practices and could be eligible to receive reimbursement for these charges. Attorneys are investigating financial institutions that wrongfully charge foreign exchange fees on transactions that were conducted online from within the United States but on foreign websites. If you were charged foreign transaction fees for purchases made online while you were in the U.S., you might have a legal claim.

Join a Free Foreign Transaction Fees Class Action Lawsuit Investigation

If you were charged a foreign transaction fee on a debit card or credit card purchase made on a foreign website, you may qualify to join this foreign transaction fees class action lawsuit investigation.

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This article is not legal advice. It is presented
for informational purposes only.