Your credit card can be a great help at easing the stress of international travel. You’ll be able to reserve cars and hotels with a minimum of hassle, not have to worry about losing a wallet or purse full of cash, and you’ll have an accurate record of all your spending when you return home.
But unless you travel abroad a lot, you might not be aware of the foreign transaction fees that may apply to much of your overseas spending.
Here is a brief explanation on what foreign transaction fees are all about, and some steps you can take for avoiding them when you travel abroad.
Foreign Transaction Fee Basics. When you travel abroad and make a purchase with your credit card, you may be asked whether you want the charge to be processed in U.S. dollars or in local currency. If you ask for the charge to be processed in U.S. dollars, then the vendor will convert whatever the charge would be in local currency into U.S. dollars. Your credit card company won’t charge you any special fees for this type of charge (since it’s being processed in U.S. dollars), but the vendor might use a currency conversion rate that is significantly less favorable than what you could get if you exchanged money at a local bank.
On the other hand, if you ask for the charge to be processed in local currency then your credit card company may impose a foreign transaction fee on that transaction. For credit card companies that impose this fee, the charge is generally somewhere between 2% and 3% of the transaction value.
Find a New Credit Card. If you frequently travel abroad, but your credit card company charges foreign transaction fees, then you may want to consider finding a new credit card. There are many credit card companies that do not charge this type of fee, and a number of them don’t charge an annual fee. Keep in mind that your new card doesn’t need to become your primary credit card, or even to replace the card that imposes foreign transaction fees. The best approach may simply be to use a new card exclusively for your trips abroad.
Pay in Local Currency. You can avoid foreign transaction fees by paying for any purchases abroad by using the local currency after having changed cash at a local bank. You may still pay a fee for the conversion (although some hotels may offer no fee conversions as a service to their customers), so you’ll have to determine of any applicable conversion fees are less than what you’d pay in foreign transaction fees. You also want to be sure that you don’t come home with excess foreign currency that you can’t use here.
Ask For Waivers Beforehand. Finally, even if your credit card company normally charges foreign transaction fees, you can call them before you travel and request a waiver for these fees. Many companies are willing to waive these fees in order to keep their customers happy. You might be able to get a waiver after the fees are already charged, but your credit card company may be less likely to do so.
You can keep your travel costs lower by understanding what foreign transaction fees are, when they apply, and what you can do to avoid them when travelling abroad.
Your credit card can be a great help at easing the stress of international travel. You’ll be able to reserve cars and hotels with a minimum of hassle, not have to worry about losing a wallet or purse full of cash, and you’ll have an accurate record of all your spending when you return home.