Traveling with credit cards
Traveling with credit cards
credit cards
Cut card fees on purchase abroad

Traveling with credit cards » Cut card fees on purchase abroad

Once a nasty surprise for international travelers, foreign transaction fees used to add a hefty toll to credit card bills. But thanks to the Credit Card Accountability, Responsibility and Disclosure Act of 2009, issuers must break down those fees in clear, accessible language, giving travelers advance notice of the real cost of making purchases overseas.

"Card companies are now required to show foreign exchange fees as a separate line item on a credit card (when you apply)," says Chris McGinnis, director of the Travel Skills Group in San Francisco. "In the past, the fees were not shown explicitly on statements, but travelers still paid them (because) the fee was bundled into the exchange rate, so it was not noticed."

Understanding the fee

Issuer fees typically come in two varieties. Some credit card companies charge a flat fee (usually about $5) per foreign transaction. But the more common practice is to charge between 1 percent and 3 percent of the total purchase. That fee can go up somewhat if the issuer uses the Visa or MasterCard network, which charges up to 1 percent per transaction. A number of issuers build the Visa/MasterCard fee into their total foreign transaction fee. Whichever fee structure the issuer uses, customers will see the total foreign transaction fee in the terms and conditions associated with their accounts.

Credit card companies assess foreign transaction fees whenever a transaction involves a foreign bank, whether it's for a balance transfer, cash advance or purchase. Thankfully, a provision of the Credit CARD Act has made the fees more transparent for travelers like McGinnis.

"I returned from a business trip to Brazil in February and gulped when I saw a $100 fee on my $4,000 credit card bill," he says.

Should you switch credit cards?

Frequent travelers or those planning an extended stay can save money with a credit card that doesn't charge a foreign transaction fee. Seeking out cards that waive foreign transaction fees may not be ideal for occasional travelers because issuers typically reserve that courtesy for premium credit cards, which may require a higher credit score or have an annual fee.

On the other hand, says Alex Moran, a former cruise director and travel guide in Sanya, China, "Travelers should always bring multiple cards, using one as an emergency-only backup."

If you need to open a second card, it may be worth choosing that card based on foreign transaction fees. Just remember, if the card comes with an annual fee, you'll need to travel enough to make that trade-off worthwhile.

Compare payment methods

But before any traveler sets foot on foreign soil, they should ask their credit card company about transaction fees so they can weigh the costs against traveler's checks or the flat fee for using an ATM card abroad, says Matthew Kepnes, editor of the travel blog NomadicMatt.com.

Fees associated with using ATMs abroad will vary, but it's important to remember they're assessed each time you use the debit card for a purchase or at the ATM. If the fee is low and you don't use the ATM all that much, it may be cheaper than paying a foreign transaction fee on your credit card.

But oftentimes, says Kepnes, even a credit card with a 3 percent fee can be the least-expensive way to use your money abroad. And knowing the fee in advance will help you build the additional cost into your travel budget.

According to Kepnes, travelers may also want to bite the bullet on foreign transaction fees, because credit card purchases can come with insurance and greater fraud protection, which can significantly ease the mind of any traveler.

"Using credit cards, even if you do have a foreign transaction fee, is almost always your best option," says Ed Perkins, SmarterTravel's editor at large. "Credit cards tend to offer the best exchange rates, so they're a good way to travel. But if you need a cash advance, you may open yourself up to an additional fee."

Some credit card companies have recently done away with the fees altogether. Check out this chart to see the foreign transaction fees that some of the largest U.S. credit card issuers charge.

advertisement

Show Bankrate's community sharing policy
          Connect with us
Product Rate Change Last week
Balance Transfer Cards 15.71%  0.01 15.70%
Cash Back Cards 16.36% --0.00 16.36%
Low Interest Cards 10.91% --0.00 10.91%
 
Search
advertisement
CREDIT CARD WEEKLY NEWSLETTER

Get advice for managing credit cards, building your credit history and improving your credit score. Delivered weekly.

advertisement

Blog

Allison Ross

BofA to pay $772 million over credit cards

Bank of America is refunding about $738 million to customers in addition to $45 million in penalties.  ... Read more

Partner Center
advertisement

Connect with us