The following is a guest post by Odysseas Papadimitriou, founder and CEO of Card Hub. Card Hub is a marketplace for no fee credit cards.
I just took a trip overseas, and let me tell you first hand, it’s expensive. This isn’t only because of the extremely unfavorable exchange rate between the dollar and currencies like the Euro, Swiss Frank and English Pound either. Nor is it simply because of costly airfare, the high-end stores that reside in many vacation destinations, or the fact that nearly everything – even water and public restrooms – comes with a cost overseas. These reasons are all certainly relevant to your trip’s tab, but a few other, far-less-obvious factors can cause damage as well. These factors are the foreign transaction fees that 90.2% of bank-issued debit and credit cards have and the dynamic currency conversion tactics that some foreign merchants employ. Both can inflate your post-trip bill, and both can be avoided.
Foreign Transaction Fees
As I mentioned, 90.2% of the plastic you get from banks have fees for foreign transactions. These fees are 3% of each transaction, and – interestingly enough – don’t only kick in when you’re physically out of the country. Rather, they are added to the cost of any purchase processed out of the country, such as might be the case with foreign-based airlines, railway companies and hotels.
Luckily, avoiding them is as simple as opening a no foreign transaction fee credit card or debit card. As their name suggests, these are merely credit and debit cards without fees for overseas use. Capital One essentially cornered the market on such cards and has made no foreign fees a standard feature on all of its cards, but other issuers – like Citi, Chase and American Express – have all gotten into the fray in recent years with a limited number of offers. As the availability of these cards continues to grow, consumers will surely continue to benefit.
Dynamic Currency Conversion
A lot’s different when you’re traveling outside of the country. As a result, you might jump at the simplicity and taste of home provided by a merchant’s offer to charge you in the all-familiar U.S. dollar rather than the local currency. However, retailers often implement high exchange rates for this supposed customer service, meaning you really get increased costs when you think you’re getting added convenience. To prevent this only sign for purchases expressed in the local currency.
Money is inextricably linked to any trip overseas. Airfare is expensive. Lodging and food are expensive. As the little costs – whether they are the fees for using an ATM or paying for internet access in airports – add up, they become expensive as well. Using a credit card doesn’t have to fit that bill. So avoid both foreign transaction fees and dynamic currency conversion, take advantage of the fact that Visa and MasterCard automatically provide some of the best exchange rates available, and keep your bank account as full as possible on your next trip overseas.