Thanks Lan. We are still looking forward to staying at Banana Beach. Tim Jeffers explained that the central Belize bank will add the conversion fee to any credit card transaction, and he recommends paying for things with US dollars or traveler's checks to avoid this. Banana Beach itself will charge a 5% service fee for any outside activities it books for it's guests that use credit cards, to compensate for the merchant account fee that gets passed on to them. They will not charge this service fee for the rooms, the in-house gift shop, or internal hotel fees.

So it seems that at the very least, using a credit card will incur a conversion fee via the Belize bank. At the worst, we'll be paying that fee, plus a potential 5% service charge, for using a credit card for other activities. I guess the lesson is to always ask before paying with a credit card.