Amex and I believe Diners Club add a 2% fee for foreign-currency transactions. Visa International and MasterCard International add a 1% fee. Supposedly, the exchange rate before the fees is the interbank exchange rate, which has no profit built into it. The fee is supposedly to cover the bank's overhead in conducting a multi-currency transaction. This is usually cheaper than paying cash, as you pay a fee when you convert your native currency to a foreign currency. Although you may think you're not paying a fee, it's built into the rate the exchanger gives you, and is probably more than the 1% or 2% rate charged above.

In addition, MC and Visa allow the card issuer to charge their own fee above and beyond the 1% fee charged by the associations. A few years ago, few banks added any additional fee. Now, it's common for MC and Visa issuers to charge 2% in addition to the basic 1% charge, although some banks charge only 1% or 0% more.

As far as anyone can tell, these additional fees are not to cover the expense of the transaction (which is already covered by the base 1% fee), but serve only as a profit center for the bank. This new fee, in addition to the greatly increased late and overlimit fees, is one of the things that we have to pay in return for most cards not having an annual fee. I remember 12 years or so ago when virtually every MC and Visa card had at least a $20 annual fee. Then AT&T Universal MC and Visa came out with no annual fee, and most issuers by now have switched over to a "no annual fee" program, except for those that earn miles or are targeted at the sub-prime credit market. The money that used to come in from annual fees has to be made up somewhere, and this is one of the places it comes from.