Westpac has refunded $20 million after it failed to properly inform credit card customers that they would be charged foreign transaction fees for overseas purchases made in Australian dollars.

The payments, to 820,000 customers, were triggered by a customer complaint over being charged fees for Australian dollar transactions that were processed by overseas merchants.

Westpac's terms and conditions did not properly disclose fees for foreign purchases. Credit:Louie Douvis

The bank had not properly explained to customers that they would still be charged foreign transaction fees in this situation, so it had to identify the hundreds of thousands of affected customers and refund fees, plus interest.

The Australian Securities and Investments Commission said that from 2014, Westpac's terms and conditions failed to disclose that customers would be charged a "foreign transaction fee" when they paid in Australian dollars to an overseas entity. This included banks located overseas, Aussie dollar purchases from an entity outside Australia, and many types of online purchases.