Traveling to a foreign country comes with all kinds of great new experiences like new food, new sights, and new friends. Unfortunately, it also comes with new problems, like foreign bank fees. These extra bank fees can really add up and you won’t even know you’re in trouble until you get home and check your account statements. Fortunately, with a little planning, you can avoid bank fees while traveling abroad so you’ll have more money to spend on your trip.
Credit card foreign transaction fees
Credit cards are accepted around the world and this can be a convenient way to pay for your hotels, meals, and other expenses while you’re traveling. All you need to do is pay by card and your foreign purchases will show up on your next statement as usual. The credit card company will handle the foreign exchange conversion.
The problem is many American credit cards tack on an extra foreign transaction fees whenever you use the card outside of the country. This fee is usually 3 percent of your total purchase and applies immediately and you can’t avoid the fee by paying your balance off at the end of the month.
The good news is a number of credit cards don’t charge this fee. You can go with a simple card like the Capital One® Quicksilver® Cash Rewards Card, which doesn’t charge an annual fee, or use a card that has an annual fee but also has more generous rewards like the Chase Sapphire Preferred® Card. There’s a decent amount to choose from. Here are the best travel credit cards with rewards and perks.
ATM fees can also sneak up on you while traveling abroad. Since you’ll be using ATMs that most likely will not belong to your American bank, your bank may charge a fee of around $5 per withdrawal. The international bank might also charge a fee, so you could be looking at a total fee of $10 or more every time you use a foreign ATM.
There are a few ways to get around this problem. First, if you have an account with Bank of America, you are part of a Global ATM network. These are banks have locations around the world, which let alliance members make withdrawals without charging an ATM fee. Another option is to sign up for a bank that refunds ATM fees. Charles Schwab reimburses all ATM fees at the end of the month and is a good choice for frequent travelers.
Since the ATM fee is the same whether you take out $50 or $500, you could minimize your fees by taking larger withdrawals. This can be risky, as you’ll be carrying more cash. Finally, if you have a friend living abroad with a foreign bank account, you could transfer them some money online through PayPal. Then, they can take the money out of their bank without a fee and give it to you. Keep in mind there are still fees charged through PayPal for moving your money this way, although it’s probably less than what you’d get charged through the ATM.
Poor exchange rates
When you convert your American dollars into foreign currency, the amount you’ll get depends on the exchange rate. Not everyone offers the same exchange rate and where you go really makes a difference on how much money you’ll receive. For example, the current euro exchange rate is about 1 dollar to 0.80 euros. If you can get this very best rate, $100 will get you 80 euros. However, many ATMs and money exchange booths will only give you a poor exchange rate of 75, 70 or even fewer euros, after fees. That’s why it pays to find a good rate.
To get the best exchange rate, you should use your American credit card whenever you can. Credit card companies work internationally and regularly exchange money so they give the best rate. Your next best option is to take money out of ATMs from large banks in foreign companies.
ATMs that don’t belong to a major bank, like the ones found in hotels and convenient stores, usually give out a much worse exchange rate and have higher fees. Converting actual cash at money exchange counters also leads to a poor exchange rate, and the money counters at the airport are usually the worst.
Take care of accounts at home before your trip
While you might be on vacation, it’s going to be business as usual with your credit cards and other bills back home. Make sure to double check when all your payments are due before you leave. It’d be a good idea to pay everything ahead of time because you might not have access to your bank account while you’re traveling. This way you can avoid costly missed payments. For example, just being a couple days late on your credit card payment could lead missed payment fee up to $35, a jacked up penalty interest rate on your account, and even a hit against your credit score if you wait too long to make the payment.
It’s also a good idea to do some research beforehand to see if your bank has locations in the country you are traveling to.
Don’t let foreign bank fees ruin your trip. By using this advice, you can avoid bank fees while traveling abroad.