1) Pay with a no foreign-transaction fee credit card
Many cards add an extra fee to each transaction you make in a foreign currency. Typically the highest foreign transaction fees are around 3 percent. That can add up quickly if you’re charging dining, lodging and other expenses when traveling internationally. It’s easy to avoid this fee by having at least one credit card without foreign-transaction fees in your wallet.
A little more than half (52 out of 100) of credit cards in the 2018 CreditCards.com Credit Card Fee Survey had a foreign transaction fee. That number’s down from 77 out of 100 in the 2015 survey. But there’s still a lot of cards that have this fee. So it pays to choose the card you use abroad wisely.
Visa and Mastercard are far more widely accepted overseas than Discover and American Express, so if you are only going to take one card make sure it’s one you can use in the most places.
For those who don’t want an annual fee or a foreign transaction fee, the Capital One VentureOne Rewards credit card, the Bank of America Travel Rewards credit card and the HSBC Cash Rewards Mastercard credit card are some options.
Some of the credit cards that don’t have a foreign-transaction fee, also don’t have an annual fee. But sometimes cards with annual fees may have more perks or earning potential when it comes to cash back, miles or points. So choose the card that best fits your spending and the perks or benefits you want in a credit card.
Keep in mind that in Europe, for instance, many merchants require chip and PIN transactions. Some transactions, such as at unattended transportation payment stations, may be rejected if your card doesn’t have a PIN.
2) Pay in foreign currency
Carrying large amounts of cash is far from ideal, and making lots of small transactions to get cash can get costly.
First, see if you can find a bank in the U.S. that doesn’t charge you a fee, or will reimburse your fee, for using an ATM abroad.
“I recommend checking to see if your bank is a member of a Global ATM Alliance which can help eliminate or reduce fees, and then just taking cash out in a local currency that way,” says Melanie Lieberman, travel editor at The Points Guy.
For instance, Bank of America is a part of the Global ATM Alliance with nine other banks in different countries. For instance, if you were traveling to Italy, you can go to the BNL D’Italia website to find an ATM. As a Bank of America customer, going to one of these ATMs would help you avoid the non-Bank of America ATM usage fee, which is $5 as well as the fee charged by the ATM.
As long as your ATM or debit card works abroad, this method can be a way to potentially get a more competitive exchange rate than you would at a U.S. currency exchange.
“Personally I wouldn’t bring any foreign currency with me unless I had some leftover from a previous trip,” Julian Kheel, senior analyst at The Points Guy. “I’ve never had an issue getting local currency from an ATM, even in China, so I’d save myself the exchange fees. However, if someone isn’t as comfortable with that as I am, they can certainly bring some local currency with them — they’ll just be paying extra for the privilege.”
It’s a good idea to let your bank know that you may be using your debit, ATM or credit card internationally. Some banks recommend you contact them before traveling, while others say there’s no need to. But generally, it’s better to take a few minutes and let your bank know to avoid problems away from home.
“I would recommend that travelers research their options upon arrival, notify their bank before departure, and make sure there are ATMs at the airport or that you’ve arranged transportation in advance,” Lieberman says. Bank branches in the U.S., a AAA location, a local currency exchange or the airport are potential options for obtaining foreign currency in the U.S. While these methods allow you the comfort of having foreign currency in your hand when you land, you’re likely to pay a premium for this convenience in fees and potentially unfavorable exchange rates.
If you use your credit card to withdraw cash at an ATM, you may face the following fees:
- Cash advance annual percentage rate (APR), which on average is around 23.13 percent APR according to Bankrate’s credit cards index.
- A cash advance fee that’s typically $10 or 3-5 percent, whichever amount is greater.
- A foreign transaction fee, typically around 3 percent of the transaction.
- An out-of-network ATM fee likely to be charged by the ATM provider.
Analysis
In looking at traveling abroad and how banking applies to its many facets, the topic of how to work around foreign currency appears to be of much debate. Credit cards have fees, debit cards are at higher risk, and ATMs might have bad exchange rates. This article introduces the no foreign-transaction fee credit card, which seems like the ideal card to have while abroad, especially if it’s a Visa or Mastercard, since those are most widely accepted. Upon hearing about this, two questions come to mind. First, why aren’t all credit cards no foreign-transaction fee credit cards? If they exist, why doesn’t every card have this feature? And secondly, what about situations where cash is the only option? Think small ice cream shops, markets, tips. Especially in Europe, not every merchant can take a credit card. Having at least a little foreign currency on you is, in my humble opinion, a good idea. The article suggests finding a bank in the US that either doesn’t charge or will offer to reimburse foreign ATM fees, banks part of the Global ATM Alliance. The advice really nails in the point of relying on one’s bank to be able to obtain and use cash abroad, which makes me think the bank has the opportunity to play a bigger role in its customers’ travel plans.
Source
Goldberg, M. (2019, July 17). The 4 best payment strategies to use when traveling internationally . Bankrate. https://www.bankrate.com/banking/international-travel-payment-strategies/
