Credit cards are the new form of travel money. What once was the realm of the traveler’s check has been taken over by the credit card. Accepted practically anywhere, flexible and easy – it’s easy to see why so many choose to pay with their credit card when they’re abroad. But is it really a good idea? Let’s look into the cost of using a credit card abroad for the typical American tourist or business traveler.
1. Higher Fees May Apply in Other Countries
If you are using your card in another country, be prepared to pay a surcharge. In some countries, the surcharge may be up to 3% to process the transaction. Some banks have a strong international business infrastructure and will not charge a surcharge at all.
Capital One and Pentagon Federal Credit Union (PenFed) both do not charge any surcharge when traveling in foreign countries. Bank of America, Chase and Citi have 3% surcharges – the highest surcharges of any US-based bank. Discover and American Express have surcharges at 2.7% and 3%, respectively.
2. Know the Currency Conversion Surcharge
When traveling outside of the country, the bank, typically, charges 1% to convert dollars to local currency and another fee for the transaction. This second fee is usually 2%. The fee may be the surcharge or they may be separate. If the credit card company charges both a surcharge and a transaction fee, the cost per transaction may increase quickly.
For instance, 3% of a $500 transaction is $15. This amount will be charged on a $5 transaction or a $5000 transaction. The international transaction fee will appear on the credit card statement.
3. Contact Your Bank Beforehand about Fees
In addition to transaction fees, banks may also charge a fee for withdrawals outside of the country. Using a credit or debit card at foreign ATMs may be very costly. The banks can let you know ahead of time what to expect. Travelers are urged to determine what the partner banks are out of the country to avoid fees while traveling.
Travelers will have to plan ahead to find banks where they can withdraw money without incurring a charge. Bank of America charges a $5 withdrawal fee in addition to a 1% international transaction fee. Chase, on the other hand, charges a $3 withdrawal fee for non-Chase withdrawals in addition to a 3% conversion fee. Citi charges customers a 3% fee after the currency conversion and $1.50 per transaction.
4. Be Aware of Interest Rates on Foreign Cash Advances
Not only will you be charges a transaction fee and a currency exchange fee, but the interest rate on your transaction may be higher. For instance, your normal interest rate may be 4%. However, the bank may charge a 25% interest rate on cash advances from the credit card if the money is withdrawn in another country. You must plan ahead to avoid astronomical interest rates while traveling abroad.
6. Always Have the Numbers of the Banks with You at All Times
Questions may arise while you are traveling out of state. You may not be able to withdraw money or a fraudulent transaction may occur. Always keep the phone number of the banks you intend to use in close proximity at all times should a problem arise. Representatives should be on call to handle your concerns or issues.
7. Notify the Bank before You Travel
Good banks keep an eye on your transactions and notice when you have transactions that are not similar to your usual transactions. The bank may suspend access to funds and the card temporarily if they suspect fraudulent activity. The account may be suspended for 24 hours after contacting the bank. This may place the customer in a precarious situation if they suddenly do not have access to funds.
8. Take a Second Card Abroad
Take a second card abroad with you in the event that you have an emergency. One card may be turned off if fraudulent activity may occur. Keep in mind that not all cards will be accepted in all locations abroad. Determine beforehand what your itinerary will be and determine if your card will be accessible in the locations you plan to travel.
9. Use a Credit Card for Protection
Credit card purchases over $100 from companies that are not International are advised. This will help clients protect themselves if something happens to the product. The credit card company will refund the cost of the merchandise if something happens to the item that was purchased.
This post was contributed by FinanceChoices.co.uk, a UK based credit card comparison service that independently reviews balance transfer deals for consumers.
Credit cards of any kind are absolutely the most expensive way to make any kind of transaction for the consumer and the merchant. Perhaps the writer could look into this rather than publish what is in effect an ad for the credit card companies.