February 28, 2007

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  NEWS: Brit Bank Jacks Up Charges

  Morgan Stanley, an American-based financial institution that has become a worldwide credit card giant, recently announced that it would be raising its charges for British card holders using their plastic outside the country, effective April 24. Tourists can now expect to be charged 3% per transaction, a quarter-point increase from the prior industry standard of 2.75% - and other banks are expected to follow suit.
  
  The out-of-country transaction fees have always existed, but were usually buried in the cardholder's monthly statement under the header of "conversion fees." The fee for withdrawing cash from an ATM is even higher than for purchases – up to 4.75%. The move to a higher fee percentage is drawing the ire of consumers and critics of British financial institutions, who call it a "stealth" fee designed to evade the Office of Fair Trading's ruling last year against exorbitant penalties. Their argument is that the fee hike is a sneaky method by which lenders can recoup the income lost when the OFT stepped in and made them cut late fees to a reasonable dollar amount. The banks have retaliated in other ways, including annual fees and reduced interest-free introductory periods, and the higher foreign fee is perceived to be the next step. Consumers are now concerned that, with Morgan Stanley setting precedent, the banks will now feel they have carte blanche to create new, higher fees to skirt the former prohibitions.
  
  The fee also signals the end of free banking in Britain. Of the major-name "high street" banks in the nation, only Nationwide still offers free debit card ATM withdrawals oversees.
  
  
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