By Jim Ferri
Like most travelers, I hate it when credit card companies charge me foreign transaction fees. It’s really aggravating to come home and find hidden charges posted on my credit card bill.
Today these fees average 3%, which may not see like a lot for that $50 lunch but can quickly add up over the course of a two-week jaunt around Europe. In addition, the dollar is now at a three-year low (the euro is now worth about $1.50), which makes cutting other costs, especially all those annoying fees, even more important for many.
There are several ways in which you can save money and protect yourself from getting ripped off when using your credit card overseas.
First and foremost, of course, is to avoid those hidden foreign-transaction fees altogether by having a card that doesn’t charge any. Several card issuers have now waived their foreign-transaction fees including Capital One, American Express (only with its Platinum and Centurion Cards) and various Chase-issued cards including the Hyatt Credit Card, Priority Club Select Visa Card, Chase Sapphire Preferred Card, British Airways Visa Signature Card and Ritz-Carlton Rewards Credit Card, the latter just launched less than two weeks ago. Citi has also gotten into the act with its ThankYou Premier Card. For a complete list of credit cards that don’t charge foreign-transaction fees visit the site NerdWallet.
But as might be expected, there’s a catch with many of these cards: their annual cost. The annual fee for that new Ritz-Carlton Rewards card is $395; Amex’s Platinum Card is a whopping $450 a year. But to be fair, some of these high-end cards do provide additional benefits.
American Express’s Platinum charge card, for example, provides free enrollment in the U.S. Global Entry program (see A First-Hand Look at the U.S. Global Entry Program), which is normally $100, free entrance to more than 600 airline clubs worldwide (usually $40-50 per day, without a pricey airline membership) and annual reimbursement of up to $200 for baggage or other ancillary fees. And several cards do waive the fee for the first year.
If you’re going to be gone for a long period of time or travel overseas frequently, it may make sense to apply for a new credit card that doesn’t charge foreign-transaction fees. But if you’re vacationing in Europe, Asia or elsewhere for just a few weeks, it’s likely that getting it won’t make sense.
MasterCard offers its Cash Passport card, which you can load with euros, British pounds or a few other currencies prior to departure. MasterCard says you can purchase it either online or at a Travelex location (go to www.us.travelex.com for a list of locations), but it comes with such a large number of fees (card fee, load/reload fee, inactivity fee after 12 months, cashout fee, etc.), and the currency conversion fee fluctuates depending on how much you put on the card, you’re probably much better off just purchasing euro-denominated traveler’s checks prior to your departure instead.
Since most of us will be heading overseas with the same card we’ve been using for years, it’s important to be aware of some potential issues. One problem to be aware of if you’re heading to Europe is that in certain places, especially those outside the major tourist areas, you may not be able to use your U.S.-issued credit card since the merchant may be equipped only to read the “chip-embedded” European cards (not the magnetic-strip cards used in North America).
Even in high-traffic tourist areas you could run into problems. Many kiosks in such places as train stations, for example, only read the European cards and you’ll have to seek out other ways to make the purchase (aka a “live person”). You’ll likely not run into this problem outside of Europe.
Recognizing the issues this is beginning to present to travelers, Chase has just introduced a fee-free chip-embedded card, which also contains the traditional magnetic strip on the side. Its annual fee is $95.
If you want to have a hassle-free vacation and avoid being ripped off, you need to be “card savvy” by keeping a few things in mind:
- Using your credit card is almost always less expensive than going to a money-exchange kiosk or bank.
- Depending upon the amount you withdraw, getting cash at an ATM can sometimes be less expensive than a local money exchanger — just be aware of any cash-advance or other fees your U.S. bank may impose. You may also find it worthwhile to use a debit card at the ATM instead.
- Always carry more than one credit card. (I always travel with three cards. I carry two on my person — should one be declined I’ve got another — and keep the third locked in my hotel’s safe deposit box, should the other two be lost or stolen). If you’ll be gone for a while it also doesn’t hurt to have a few traveler’s checks tucked away.
- In an effort to cut down on fraud, European legislators have now made it easier for merchants to refuse magnetic-strip cards. Carry your passport (safely hidden away, of course) to identify yourself should there be an issue with your card.
- Call your bank before you head for the airport and alert them of your travel plans. If you don’t travel overseas often, they may flag your transaction as fraudulent and freeze your card for the remainder of your trip.
- Never sign a credit card chit or bill that is posted in dollars – no matter how charming or “helpful” a merchant is trying to be — since you’ll have been charged a high exchange rate. Always stick with paying in the local currency.
- And, finally, write down the customer service numbers of your credit cards (found on the back of most cards) so you’ll have the means to contact those banks should your card get lost or stolen. Obviously, you’ll want to keep it tucked away in your suitcase, not in your purse or wallet.