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U.S. Tourists in Europe May Soon Pay Foreign-Exchange Fees Again

Jenny Surane
U.S. Tourists in Europe May Soon Pay Foreign-Exchange Fees Again

(Bloomberg) -- A recent change to credit-card swipe fees in Europe could mark the end of a popular benefit for tourists from the U.S.

Visa Inc. and Mastercard Inc. agreed in April to reduce swipe fees in Europe, a move that threatens banks’ ability to offer credit cards without foreign-exchange fees, said Discover Financial Services Chief Executive Officer Roger Hochschild.

Visa and Mastercard are cutting their so-called interchange fees by an average of 40% for transactions in the European Union completed with cards issued outside the bloc. For in-store purchases, the fee is capped at 0.2% when debit cards are used and at 0.3% for credit cards. With Visa and Mastercard setting the interchange fees that banks collect each time a card user makes a purchase, U.S. banks will need to decide whether to change their rewards to cover the fee changes in Europe.

“You’re going to see significant reductions in interchange for inbound U.S. customers -- that can get expensive,” Hochschild told investors at a Morgan Stanley conference Tuesday. “So you may see FX fees coming back to cover that.”

His company’s Discover It Miles card is on a list of top credit cards with no transaction fees compiled by The Points Guy website, alongside cards issued by JPMorgan Chase & Co., Citigroup Inc. and American Express Co.

Hochschild said credit-card rewards competition has plateaued in recent quarters, and that competitors aren’t introducing cards with as attractive points bonuses as they once did.

“I remain convinced that some of the richer ones out there are not profitable,” he said. “When you hear people talking about ‘strategic value’ or ‘relationship value,’ that’s kind of code for ‘I’m losing money on that product.’”

To contact the reporter on this story: Jenny Surane in New York at jsurane4@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Daniel Taub

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