As promised- Part 2! When should you use credit cards overseas? How about your debit or and ATM to withdraw your money?
The most important step is to know your options. Travelers often rely on credit cards and ATM withdrawals, which usually offer better exchange rates and lower fees. Credit cards may best be used for large purchases like hotel bills and flights because credit card purchases are exchanged at the interbank exchange rate, usually the best rate you can get for currency exchange. While most credit card issuers charge currency conversion fees each time you make a purchase in a foreign currency, these fees are typically lower than those you’d pay to convert your own currency at a change bureau. The change bureaus especially near train stations and airports usually have the worst exchange rates and should be avoided.
Avoid using a credit card for a cash advance as you will pay for the transaction fee of about $10 or 5% and be charged the cash advance APR until paid off. Any fee that you pay to get cash with your check card at an ATM would be lower than your credit card advance charges. As most cards charge a fee for using another banks ATM, research if your bank has ATM’s in the country you are traveling to. This could save you both your banks fees and the fee from using the foreign ATM.
DOES YOUR CREDIT CARD CHARGE FOREIGN TRANSACTION FEES?
Most American issued credit cards tack on a 2-3 percent fee to any charges made overseas. You might consider applying for a no foreign transaction fee credit card such as Capital One if you have a few weeks to do so before traveling. This is advice best taken by frequent or long term international travelers who would benefit from the savings. It might not be wise to apply for and maintain a new card for just one trip.
IS IT CHEAPER TO USE A CREDIT CARD OR TO PAY BY CASH?
It may be more cost efficient to get cash at an ATM than at a cash exchange counter, but if you want to avoid fees, you may be better off making a purchase directly with your card than exchanging for cash first. Certain Visa debit cards charge a 3.5 percent fee for ATM withdrawals, for example, but only 1.75 percent for direct purchases. Contact your card provider to find out all the details on your specific card details.
Looking for more tips about using credit cards overseas? Read Part 1 of this blog entry: Will My Credit Card Work Overseas?
Frontline Processing will keep all our merchants up to date as EMV or chip cards become more widely used and accepted in the US along with the conversion schedule of our merchants this year for EMV acceptance. We are always happy to answer your questions by contacting us at 1-866-651-3068.