AAA Raw Deal

I like AAA, and I think every American driver should join. Over the years I’ve gotten help from AAA for flat tires, dead batteries and keys locked inside the car. And I’ve saved a lot of money on hotels all over the country. So I was really surprised when AAA gave me a raw deal on a prepaid credit card.

The AAA Visa TravelMoney prepaid card seemed like a great idea when the husband and I were planning a three-week trip to Russia and Scandinavia last year. We could load the card up with our own cash and use it like a debit card on our trip. If it was lost or stolen, AAA would replace it. And we wouldn’t expose our own credit cards to theft or fraud.

Here’s how AAA promotes these cards:

Looks good, right? So I went to my AAA office and bought a card for $4.95 and a second card on the same account for $2. And I gave AAA $1,500 to load onto the card. It wasn’t until later, when the husband read the fine print in the pamphlet that came with the cards, that I found out the cards charged an outrageous foreign transaction fee.

Here’s the fine print:

Foreign Exchange: If a card transaction is made in a currency other than that loaded on the Card, the amount will be converted into the appropriate currency at an exchange rate on the day the transaction is processed. The exchange rate used is the wholesale money market or the government-mandated rate increased by 7% (including the VISA handling charge of 1%).

Seven percent? It’s beyond outrageous. It’s usurious.

I brought our cards back to the AAA office, where I got a full and courteous refund of my $1,500 and the fees. Even so, I told the AAA representative that I was angry about the 7 percent fee, which had not been disclosed to me.  I admitted that I hadn’t read the fine print, but I told her that I never would have expected a respected organization like AAA to be involved in such a consumer-unfriendly deal.

The AAA representative told me that the 7 percent charge should have been mentioned when I bought the cards, but that it was not out of line with what regular credit cards charge. And she said the extra protection and peace of mind might be worth it to some customers.

I disagree. My two credit cards charge 2 percent and 3 percent on foreign currency transactions, and some cards charge only 1 percent.

I guess some people might want to use these prepaid cards in the United States, where the 7 percent fee does not apply. But there are many other, smaller fees attached to these cards. If you’re thinking about getting one, I suggest you read all the fine print.

If you want to know more, generally, about getting the best deal on credit card foreign exchange rates, Rick Steves has a nice, concise article.

And if you are a loyal AAA member, as I am, please ask AAA not to abuse its members with predatory exchange rates.


4 thoughts on “AAA Raw Deal

  1. Denise

    I just returned from a week in London using a AAA Visa TravelMoney card.
    Everywhere I used the card, I was asked whether I wanted to be charged in pounds or dollars. I always chose “dollars”, and never saw a fee.
    Just fyi.

  2. Jeanne Leblanc

    Denise raises an interesting point, but I’m not convinced that this kind of dynamic currency conversion is a good alternative. Here’s what Rick Steves, the Europe travel guru, says about that on his website:
    Avoid “dynamic currency conversion.” Some merchants — capitalizing on the fact that many Americans are intimidated by unusual currencies — cheerfully list their prices in dollars. This seems like a nice service, but you’ll actually end up paying more. Usually the dollar price is based on a lousy exchange rate (which can be set wherever the merchant likes — generally about 3 percent worse than the prevailing inter-bank rate). To make matters worse, even though you’re paying in “dollars,” your credit-card company may still levy its 2-3 percent “foreign transaction fee.” According to Visa, you have the right to decline this service at the store and have your transaction go through using local currency. Your transaction will then be converted by Visa or MasterCard at or near the more favorable inter-bank rate.
    Of course, if the merchant is just tacking on 3 percent and the AAA card really doesn’t add on its additional 7 percent, it’s a better deal. It’s still not a real good one.
    My advice is still this – get a card that doesn’t charge a foreign currency transaction fee. There are a few, including Capital One.

  3. Thomas

    Used a AAA prepaid Visa in Italy this summer. I refrained from using the card very much because the 7% fee was outrageous. Never again will I use one.

  4. Steve

    Actually, the best way to use cash overseas is to load one’s checking account with the amount you anticipate using, then use your ATM card in foreign countries to draw cash (in foreign currency) as you need it.
    My bank charges NO transaction fee, and gives me the best interbank exchange rate when drawing local currency from an ATM. I did this recently in Australia and have done it in the UK without any fees or problems.


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