Tuesday, June 12, 2018

Travel Tip Tuesday Navigating Foreign Transaction Fees

Travelers that use credit cards when traveling aboard always get hit with a foreign transaction fee on purchases or bank withdrawals.  At the end of the day, credit and debit cards are the best way to exchange money and purchase items, but the hidden transaction fees are annoying.  There are a few ways to navigate the fluctuating and confusing world of foreign transaction fees.  The first thing to be aware of are the two types of fees imposed on foreign transactions.

  • Foreign Transaction Fee that  is called a currency conversion fee and ranges from 1% to 3% of the purchased amount
  • International ATM Fee is when banks and credit unions charge between $1 and $5 for using an ATM in another country as well as a percentage of the amount that you withdraw.  It is notable that when you use an ATM in another country, the bank that owns the ATM may also have its own fee structure in addition to the fees imposed by your bank or credit union.

Credit Cards

When you use a travel rewards credit card outside the U.S., you lose about 3%.  But, the good news is that with some cards, you lose nothing.  In addition to no foreign transaction fee, these credit cards, although pricey, also offer many travel perks that add up. Credit cards that don't charge a fee to process foreign transactions include: Capital One Quick Silver Cash Rewards Credit Card, Chase Sapphire Preferred Card, Bank of America Travel Rewards Card, Southwest Rapid Rewards Premier Credit Card, The Platinum Card from American Express, Bank of America Premium Rewards Credit Card, Citi AAdvantage executive World Elite Mastercard, Premier Rewards Gold Card, American Express, British Airways Visa Signature Card, Mastercard Black Card, and Mastercard Gold Card. For an up to date, list click here.

Most credit card networks like American Express, Discover, Mastercard, and Visa assess a conversion fee of about 1%.  The trouble comes when some U.S. banks add surcharges to foreign transactions - even when the charge is in U.S. dollars. Most often the surcharge is 3% with 2% going to the bank for doing absolutely nothing. There are a range of bank cards now available with no fee or only a 1% network charge.  Check with your bank for what they offer.

ATM and Credit/Debit Cards

Many banks in the U.S. add a $3 to $5 surcharge when using a credit or debit card at a bank that is not their bank, no matter where the bank that you are using is located.  It is best to check with your bank to see if they offer a no-fee foreign ATM withdrawal.

Some banks have partnerships or branches in foreign countries where travelers may be eligible for free services.  Bank of America, for example, belongs to the Global ATM Alliance of banks that don't add withdrawal fees at member bank ATMs.  For more information click here.  It is best to check with your bank on fees and the best way to use your debit/credit card when traveling.

Buy Currency Before You Go

If you don't want to arrive at a local destination without any currency, you can always exchange currency in the U.S.  This can be very expensive and Air WatchDog reported that Bank of America sells Euros for about 5% higher than the bank rate.  Buying currency at a U.S. Departure airport is not a good option either because they mark up the currency by as much as 15%.

Exchange Cash @ the Destination

Whenever you exchange currency according to Nerd wallet, you can expect to lose anywhere from 5% to three times as much! Rates at hotels usually have the worse exchange rates and foreign exchange offices are not much better.

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