Foreign transaction fees, cash advance fees, and currency conversion can put a damper on your trip
If you’re planning to take a trip out of the country, your credit cards may not be at the top of your list of things to consider. If you’re not careful, however, you can rack up more fees and charges than you meant to, putting a damper on your trip.
Here are the factors you need to think about before you go.
- Foreign Transaction Fees
- Cash Advance Fees
- Dynamic Currency Conversion
- Is Your Card Accepted?
- Fraud Protection
- Know Your Perks
- Other Tips
If you got your card after you got back from your last international trip, you may not have considered the foreign transaction fee attached to it. This fee is charged by credit card companies’ networks around the world for simply making a transaction in a foreign country.
On most cards, this charge is either a percentage or a flat fee—whichever is higher. The percentage is usually about three percent.
If you want to use a credit card while you’re abroad but don’t want to be charged a foreign transaction fee, you’ll need to use one that does not include it. Some examples of such cards include the Amazon Prime Signature Rewards Visa, Chase Sapphire Preferred, and Capital One Venture Rewards.
Need cash but don’t have a debit or ATM card? You can use your credit card to get a cash advance, but beware: you’ll be charged a cash advance fee if you do.
These fees can go as high as five percent per withdrawal, or they can be a flat fee amount—again, whichever is more. This is in addition to the transaction fee that you will be charged by the bank that owns the ATM you’re using.
And then there’s the annual percentage rate (APR). On certain cards, this amount can go as high as 29.99 percent. Do everything you can to pay off your full balance when your payment is due if you want to avoid having to pay this interest on top of the other fees.
In every country, prices are listed in the local currency. This can make it hard on travelers to figure out the price in their own currency. For this reason, foreign merchants perform a service called dynamic currency conversion, which means that they charge your card in your currency (in this case, U.S. dollars) rather than in the local currency.
At first glance, this seems like a great convenience for travelers: they don’t have to worry about doing the math to convert prices, and they can also avoid getting charged for converting currency on the transaction.
But there’s one thing that these merchants are not telling you: the exchange rate is far different from the market rate. This means that you pay much more than you would have if you had paid in the local currency, giving them a nice commission.
By law, foreign merchants have to give you the ability to decline this service and charge you as they normally would. However, some will break this law and charge you for the conversion anyway. To make sure this didn’t happen, check your next statement as soon as you get it and file a dispute right away if you see any problems.
Make sure before you leave that the card you’re planning to use is accepted where you’re going. It’s a good idea to have at least two cards, one from each network (e.g. one American Express card and one Visa card), in case a merchant doesn’t accept a certain card.
If you only plan on taking one card, Visa is your best bet. Every retailer in the U.S. accepts Visa cards, and most foreign retailers will take it too. Your next best bet is MasterCard, then American Express, then Discover.
Chances are that your credit card comes with fraud protection protocols that enable the issuer to monitor where your card is being used. If they see that it is charging transactions in a foreign country where it has never been used before, they will probably think that your identity has been stolen. If this happens, they will freeze your account to prevent more “fraudulent” activity on the card.
Why do they do this? Most card issuers do not hold cardholders responsible for unauthorized charges. They’re the ones who take the losses. Naturally, they want to limit those losses as much as they possibly can, even if it means inconveniencing the cardholder.
Fortunately, there is a simple way to avoid this situation. Before you leave on your trip, contact the issuer’s customer service department and let them know where you will be going and using your card. Make sure to give them information about every location you will be at, including airports where you will only be spending a brief amount of time, such as on a layover.
Most credit cards come with perks like purchase protection, travel insurance, and lost luggage protection. Some may also include services such as roadside assistance and car rental insurance.
However, you can’t use perks that you don’t know you have. Before you head out, make sure you know about all of the perks and benefits that are included on your card.
- Make sure your credit cards are still valid—and will continue to be valid throughout the duration of your trip—before you go. If it’s expired or set to expire while you’re away, the new card will be sent to the address on file with the issuer, not to your destination. Don’t get caught off guard.
- Check your current credit limit too. Make sure you’ve got enough credit to cover your whole trip. If there’s already a balance on the card, pay off as much as you can before you go. This will help make sure the card will not be declined when you really need it.
- Store the card account numbers somewhere safe—somewhere that only you can get to. This will be helpful in the event that your card is lost or stolen.
- Carrying more than one card is a good idea. It will ensure that you still have access to your money if something happens to one of your cards. However, do not keep the cards in the same place. If you keep both in your purse or wallet and it gets stolen or lost, both cards will be gone. Protect yourself by keeping them separate.
Credit cards can be excellent tools on trips abroad, but they can also be liabilities. Protect yourself and your money by taking these precautions before you leave.
Source: BankingSense: “Using Your Credit Cards Overseas: What You Need to Know”