How to Avoid Cost Pitfalls When Using Credit Cards to Shop Online

Credit cards are the second most popular means of settling payments in Switzerland. Only cash (at brick-and-mortar stores) and invoice billing (at online stores) are more popular. But in spite of the popularity of credit cards, many consumers are not aware of the possible cost pitfalls which accompany paying online with credit cards. Here, moneyland.ch explains which costs to watch out for.

Online payments with credit cards

Around 80 percent of participants in the Swiss Payments Survey by moneyland.ch stated that they use credit cards to pay for online purchases. 31 percent use prepaid cards for online shopping online, and 50 percent use debit cards for this purpose.

But many people are not aware of the possible hidden costs of using credit cards to pay online. This is especially true if you use credit cards to shop at foreign online merchants.

Foreign transaction fees when paying online

When you pay for purchases from foreign merchants like Amazon in a foreign currency, you pay foreign currency exchange fees. These include both the foreign transaction fee which is charged by the credit card issuer, and the spread between the buy and sell prices for currencies. Foreign transaction fees vary depending on which credit card you use. These fees are clearly shown in the interactive credit card comparison on moneyland.ch. You can learn more about credit card foreign transaction fees here.

Dynamic currency conversion

You should always be wary about paying for purchases from foreign online merchants in Swiss francs. Many Swiss credit card issuers now charge foreign transaction fees for purchases made in Swiss francs, when the purchase is transacted outside of Switzerland (at a foreign online store, for example). If a credit card has a foreign transaction fee for purchases from foreign merchants in Swiss francs, it is clearly stated on that card's information page in the moneyland.ch credit card comparison.

Card issuers justify foreign transaction fees with the higher fees charged by Visa and Mastercard for international purchases and the higher risk of credit card fraud when paying outside of Switzerland.

The foreign transaction fees for purchases from foreign merchants paid in Swiss francs are one of the reasons why you should avoid dynamic currency conversion (DCC). When you use dynamic currency conversion, the cost is shown in Swiss francs, but the exchange rate is often unfavorable. Because most Swiss credit cards charge foreign transaction fees even when you pay in Swiss francs, the dynamic currency conversion fee adds an unnecessary cost for foreign currency transactions, on top of your credit card's foreign transaction fee. Some online merchants (Amazon, for example) let you pay in Swiss francs instead of euros, but that generally works out more expensive than paying in the foreign currency.

Foreign transaction fees on websites with Swiss domains

Aside from dynamic currency conversion, there are other pitfalls which can result in your paying foreign transaction fees for purchases in Swiss francs. You generally pay foreign transaction fees when you shop at online stores which do not have a Swiss domain (.ch), including when you are rerouted to a foreign merchant from a Swiss domain (like Amazon.ch). But even online stores which appear to be Swiss may in fact be operated by foreign merchants.

Some foreign merchants operate Swiss websites although they do not have offices in Switzerland. Swiss card issuers tend to be accommodating with purchases from big name foreign merchants which operate online stores with Swiss domains (like Zalando.ch). Some even waive foreign transaction fees for specific foreign online stores.

In extreme cases, it is even possible that you may be charged foreign transaction fees when you shop at online stores with Swiss domains (.ch) which are run by Swiss companies. This can happen when transactions are processed by a foreign payment services provider on behalf of the Swiss merchant.

In every case, moneyland.ch recommends that you take a quick look at the imprints of online stores to determine whether the merchant is based in Switzerland or abroad. If you are not sure, ask your credit card issuer about the fees you can expect to pay when buying from the merchant in question. Your IP address has no effect on whether or not you pay foreign transaction fees. Regardless of where in the world you are shopping from, you generally will not be charged fees when you use Swiss credit cards to pay at Swiss merchants in Swiss francs.

Tip: Consider using a credit card which does not charge foreign transaction fees for payments in Swiss francs. The Migros Cumulus Visa credit card is among the few Swiss credit cards which fall into that category.

More on this topic:
Compare Swiss credit cards now
Can stores charge a markup when I pay by credit card?
Credit card foreign transaction fees explained
Dynamic currency conversion explained
Overview of payment methods at major Swiss online stores