Banks get creative with cash advance fees

Buying euros results in two extra charges for customer, then she's dinged for paying it off

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SAN FRANCISCO -- Oakland resident Dominique Pfaff had a little extra time before boarding a flight to her native France this summer, so she used her credit card to get 100 euros in pocket money from a foreign-exchange service at San Francisco International Airport.

She knew there'd be some kind of conversion fee involved, but she didn't find out until her Bank of America statement arrived in August that she'd been hit with a $10 "cash advance fee."

Also, there was a $1.43 finance charge because she hadn't yet paid off the cash advance.

"How is this a cash advance?" Pfaff asked. "I used my credit card to buy euros. I saw it as buying a commodity, just as I might buy a sweater."

Moreover, doesn't any use of a credit card constitute a cash advance - in other words, money borrowed? How is the buying of euros so different that it requires a separate charge?

"This was a puzzlement for me," Pfaff said.

It turns out Bank of America isn't alone in imposing a 3 percent conversion fee along with a 3 percent cash advance fee when a credit card is used to obtain foreign currency.

Citibank also charges 3 percent conversion and cash advance fees. Wells Fargo charges a 3 percent conversion fee and a 4 percent cash advance charge.

Each bank also sets a minimum fee for its cash advances. Citi and Wells Fargo each charge a $5 minimum. Bank of America charges a $10 minimum.

Betty Riess, a Bank of America spokeswoman, said she couldn't comment on a specific customer's situation. But she said that obtaining euros with a credit card is clearly not the same as buying a sweater with that same plastic.

"At a department store, you're getting an item," she said. "With euros, this is a cash advance on your card."

But how is that different? In both cases, money is being borrowed from Bank of America to take possession of something of value.

"There's a difference between purchasing an item and getting cash," Riess replied. "You're getting cash against an unsecured line of credit. That's a cash advance."

But if I buy a sweater, I'm also getting something against an unsecured line of credit.

Riess thought about that for a moment. "There's a difference," she said.

Ken McEldowney, executive director of Consumer Action in San Francisco, said he understands that banks draw a distinction between currency and other commodities when it comes to credit cards.

"I just don't see any way to defend it," he said. "For the bank, it's a simple transaction - certainly not one that justifies fees of that magnitude.

"I can't see any reason why there should be a fee for a cash advance under any circumstance," McEldowney said.

For Pfaff, it didn't end there. She said she called Bank of America in August to complain about the cash advance and finance charges, and was told that they were one-time-only expenses.

But then her September statement arrived and there was another finance charge, this time for $1.78. Pfaff called the bank and demanded to know why she was getting dinged again.

She said a service rep explained this time that, because of the cash advance, the finance charges would continue until all outstanding payments had been paid off.

So Pfaff instructed the bank to pay whatever was due on her card from her Bank of America checking account.

A few days ago, she received her October statement. No finance charge this time. But there was a $15 "pay by phone fee."

"All I could do was laugh," Pfaff said.

David Lazarus writes for the San Francisco Chronicle.

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