When abroad, be careful how you pay
Between pricey airfare and a weak dollar, vacationing on a shoestring may not be so easy for Americans traveling abroad this summer. Yet before deciding on a more dollar-friendly destination or booking a cheaper hotel, take a look inside your wallet. Choosing the right way to pay can help you trim costs and even splurge a little more.
Travelers have no shortage of options when it comes to paying the bills abroad, from traveler's checks to credit and debit cards. Yet paying by plastic typically offers vacationers the best deals. That's because credit card companies receive better exchange rates than those offered to travelers at exchange bureaus, banks, or hotels. The same is true for cash withdrawals at ATMs, which give travelers access to more-competitive wholesale rates.
"The only time I would consider traveler's checks is if I were going to some Third World or underdeveloped area where credit cards are not readily accepted," says Ed Perkins, a contributing editor of SmarterTravel.com and author of Business Travel When It's Your Money. Perkins also recommends avoiding prepaid traveler's check cards, which often charge hefty fees to purchase and load with money, in addition to fees every time a purchase is made in a foreign currency.
There are also pitfalls to using a credit card abroad, so choose your card wisely. Most cardholders will see a "currency conversion" fee on their statement for every purchase made in a foreign currency. Credit card companies typically tack on a surcharge ranging from 1 to 3 percent, which can either include or be in addition to a 1 percent fee imposed by Visa and MasterCard. Terms vary, so check with your issuers before leaving. Chase customers, for example, can expect a flat 3 percent surcharge per purchase, while American Express adds a 2 percent currency charge and Capital One lets cardholders charge away without incurring any additional charges.
Fees for withdrawing money from an ATM overseas can vary as well. Some banks charge a flat fee for using an unaffiliated ATM but will waive that amount for specified tellers. Bank of America cardholders can use ATMs within the Global ATM Alliance Network (including the U.K.'s Barclays Bank and Germany's Deutsche Bank among others) free but are assessed $5 plus a 1 percent conversion fee for using an out-of-network ATM. Citibank allows free withdrawals to its customers at any Citibank location abroad but charges $2.50 for all other transactions. If you plan on using your card to make debit transactions, check with your bank to see if the 1 percent Visa or MasterCard charge will apply and what additional fees the bank may impose. And be aware that credit cards in general offer more fraud protection than debit cards, in case your card is lost or stolen abroad.
Travelers should also be wary of "dynamic conversion," in which merchants offer to convert the bill into dollars.
"You could often more than double the fee based on what the merchant does," says Perkins. That's because a merchant may tack on fees for converting your money, in addition to whatever your credit card issuer charges.
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