Ways to minimize cost of conversion

 Both our credit cards and ATM cards were major conveniences on a recent trip to Mexico, making it painless to pay bills, buy things and get pesos. Indeed, the ease of electronic commerce may be the biggest advancement in travel of recent decades, and that is especially true when foreign currencies are involved. I still wonder at the simplicity of inserting my ATM card in a banking machine someplace far away and coming away with a neat stack of euros, pesos or yen.

But several weeks later when the credit card bills and bank statements arrived in the mail, I was reminded that this convenience comes at a price. In our case, the American Express price was $6.22 on 3,245 pesos ($311.15 calculated at that day's exchange rate of .094887096 pesos to the dollar) worth of charges, while foreign exchange fees added $38.15 to our Visa charges of 13,400 pesos ($1,271.48).

It should come as no surprise that both Visa and MasterCard, which together circulate the vast majority of bank-based credit and debit cards, automatically add 1 percent to all transactions that involve a foreign currency exchange. But that fee is partly offset. In addition to the other customer benefits of credit cards, these electronic exchanges are calculated on the basis of the interbank rate on the day the transaction is posted to the account, rather than the day of the transaction is made. In either case, that rate is almost always much more favorable than any legal rate a solo traveler is likely to find for relatively small spot transactions.

More difficult to understand, however, is the extra fee that is then tacked on to the total by the issuing bank, the one whose logo is printed on the card. Even though they do little more than add the completed foreign currency transaction to the customer's normal monthly statement and process the payments, most banks these days bump up the bill by 2 more percent, bringing the total exchange rate assessment to 3 percent. Of course, if you don't pay the bill entirely each month, that extra percentage gets figured into the total that is subject to subsequent finance charges.

The Visa and MasterCard institutions that take this extra 2 percent dip out of the traveler cash stream include Citibank, MBNA, Chase, Bank of America, and U.S. Banncorp, as well as local favorites like PNC, Citizens, National City and Juniper/Barclays, which issues the new US Airways card. Capital One, which promotes the "No Hassle" card, is one of the few that does not charge this extra fee.

American Express, a non-bank credit card that doesn't get involved with the 1 percent Visa or Mastercard fees, charges a flat 2 percent for most foreign currency purchases.

Similarly, most banks assess conversion charges ranging from 1 percent (Citibank) to 3 percent (Bank of America, Chase, Wells Fargo) on foreign purchases made with their debit cards.

Fees for ATM withdrawals from foreign machines vary a bit more. Some debit card issuing banks assess a percentage that ranges from Citibank (1 percent), U.S. Banncorp (2 percent) to MBNA and Bank of America (3 percent). Others collect a flat conversion fee of between $3 and $5 per transaction. The bank that owns the ATM may charge an additional transaction fee.

Short of completely forgoing the advantages of paying with plastic, there's not much a traveler can do to avoid these foreign conversion charges, other than signing up for cards that assess a lower fee rate. On some large transactions, it may be possible to negotiate a foreign sale price calculated in dollars to avoid the exchange fee.

Finally, make a point to check your statements. To their credit, many Visa and MasterCard bills break out the details of foreign exchange rates and conversion fees incurred with each charge, while American Express simply bumps up the final charge by 2 percent.