Credit Card Tips for International Travel
We are entering the peak of the travel season. Americans making international trips know that the dollar has dropped in value, adding to the cost of overseas travel and purchases.
When making international purchases, consumers should be aware that the credit card usage can add an additional 3% to the cost of the transaction.
Like many fees for credit cards, it varies by issuer and can be confusing for consumers. If you have several cards, it is a good idea to compare the foreign transaction fees before you get on the plane. Since this is charged on every purchase that you make with your card, you can save a few dollars by using the card with the lowest fee.
Visa and MasterCard charge a 1% processing fee. Then, the issuing banks add their own fee. This fee is charged after the conversion to U.S. dollars. Many cards charge 3% for the foreign transaction fee. However, Capital One and Discover absorb the processing fee and they do not charge a fee for foreign transactions.
Keep in mind that transactions you make with your credit card in a foreign currency (one other than U.S. dollars) will be converted to U.S. dollars. For example, a purchase that costs $200 Euros is converted to $314 US dollars. The transaction fee will be charged as a percentage of $314 (Currency exchange fluctuates from day to day).
Here are examples of the foreign transaction fee that some credit card companies charge:
* Capital One- Does not charge a foreign transaction fee
* Discover- Does not charge a foreign transaction fee. Keep in mind that Discover is not accepted in many countries. If you plan to use Discover, make sure it is accepted where you are going. It is currently accepted in parts of Canada, the Caribbean, Central America, Mexico, and China.
* JP Morgan Chase-3%
* Bank of America-3%
* American Express-2%
If you need cash, your best bet is always a debit card. Many places in foreign countries have ATMs affiliated with Visa and MasterCard. Before you leave, check to see if your debit card issuer partners with a bank in the countries where you
are traveling. If you use ATMs from a partner bank, they may waive the ATM usage fee, which typically ranges between $1.50 to $5. Keep the transaction receipts in case you need to mail these in to your hometown bank to get them refunded.
You can use your credit card to get cash advances at ATMs outside of the U.S., but this is not recommended because you will be charged a 3% cash advance fee and a fee for ATM usage, and possibly other finance charges.
Here are six tips for using a credit or debit card overseas:
1. You might want to charge larger purchases. Credit cards typically provide good exchange rates so it could be cheaper to charge a large purchase rather than paying for it out of pocket. However, most cards also charge a 3% foreign transaction fee so you might need to do a little math to see if it is worth it. Also credit cards will provide you with some protection if the product is defective or you have other problems with the purchase when you get home.
2. Use debit cards at ATMs for cash. Debit cards used at ATMs offer good exchange rates, but sometimes come with fees. The typical surcharge is between $1.50 and $5 per
transaction. Some also add foreign transaction fees. Ask your bank if it has banking partners that waive the fees. Also ask your bank what you should do if the ATM only
recognizes four-digit PINs.
3. Do not use your credit card at an ATM to get a cash advance. Cash advances charge significant transaction fees and surcharges. Unlike regular purchases, cash advances
command a steeper interest rate that begins accruing immediately.
4. Know the exchange rate. Local banks and some hotels are the best places to exchange currency.
5. Keep some local currency and traveler’s checks for emergencies. It is a good idea to have some of the local currency with you when you get off the plane.
6. Notify your bank and credit card issuer that you are leaving the country.