The even more in depth question is: when the foreign purchases were being converted to USD by the merchants, are there a 3% or more "fee" built in the exchange rate used?

Hertz converted our rental car charge in Scotland, to USD, without even informing us such practice. The rate they used to convert the GBP to USD is exactly 3% higher than the prevailing rate at the time. At least my Schwab Visa did not add any more fee on that, though it totally defeat the purpose of using Schwab card for the rental car.

There are a lots of talks about double charges on the purchases being "BILLED" in USD. 3% on top of 3%. You are seeing more and more places have a default option of converting foreign currency billing in USD on your card - you have to manually choose the other option, so the charge to your card is in local currency. I just experienced this when purchased tickets on Virgin Blue, Australia.