It’s true. Credit cards and ATM cards have made foreign travel easier. No more carrying wads of cash around to exchange at questionable rates from even more questionable persons. And does anyone use travelers checks anymore? However, foreign transaction fees and ATM withdrawal fees can erode your travel budget. Here’s how to use your plastic overseas without paying the fees.

What’s the best credit card for travelers?

 

Attention travelers from the United States: If you want to keep your hard earned travel dollars in your wallet where they belong while you’re overseas then you should be carrying credit cards and ATM cards that do NOT charge a foreign transaction fee. Sadly, avoiding those fees is a big challenge and it’s getting harder every day.

You may not even be aware of it but virtually all banks and credit card companies charges a 1% to 3% foreign transaction fee on every single credit card purchase you make abroad.

Not only that, but when you take out cash from a foreign ATM you are almost always paying the local bank’s ATM fee AND  the 1% to 3%  foreign transaction fee that your home bank is charging you to access local currency. A number of banks even charge you an extra flat fee of up to $5 per ATM withdrawal.

(There’s a scary list of current foreign transaction fees charged by major US banks at the end of this post.)

Let’s say you are a Chase customer and you want to withdraw the equivalent of US$300 in Euros while you’re in Italy. If you visit an out-of-network ATM (note the scary health insurance-like language) you will pay about US$10.50 in foreign transaction fees PLUS any Italian bank fees on the transaction. That means that it’s not that hard to hand over up to 5% of your total ATM transaction to the banks before it ever sees the inside of your pockets.

This is because the international credit card networks (Visa and Mastercard) charge a 1% fee to the issuing bank that you hold your account with. A few of these banks merely pass on this 1% fee to you. Many take the opportunity to tack on their own fee, increasing the percentage that you pay to 2% or even 3%. A very, very few banks not only don’t charge their own foreign transaction fee but agree to eat the credit card companies’ 1% fee as well so their customers can enjoy fee-free ATM withdrawals and credit card purchases overseas.

That’s why we opened an E*Trade Financial checking account and that’s why we carry Capital One credit cards. Capital One is the only major credit card provider that we know of that does not charge a foreign transaction fee for all customers (and we’ve done exhaustive research).

However, we just learned (the hard way) that all E*Trade ATM and debit cards now incur a 1% foreign transaction fee on purchases and ATM withdrawals outside the US  because the bank has decided to stop eating the 1% fee they’re charged and pass it on to customers instead.

We just contacted Capital One, where we already have credit cards that are blissfully free of foreign transaction fees, and the company confirmed that their banking accounts are ALSO free of foreign transaction fees.

We, like you, work hard to save money for travel and we’re also careful to conserve our money once we’re on the road. That’s how we’ve kept our Trans-Americas Journey going for almost four years now. We estimate that we’ve saved nearly US$1,000 a year by religiously avoiding ATM and credit card foreign transaction fees during our Trans-Americas Journey.

We are now in the process of closing our E*Trade checking account and opening a Capital One checking account and we suggest that other travelers from the U.S. do the same.

Another thing to look for when you’re choosing a bank account that’s most suitable for overseas travel is a policy of refunding a  certain amount of the ATM fees you incur from domestic or foreign banks each month. For example, Capital One will credit your account up to US$10 per month in ATM fees charged by other banks  as long as the foreign bank codes the fee correctly, which most major international banks do.

 

Share what you know and help travelers beat the banks! The information in this post pertains to travelers with US-based banks and credit cards. Submit a comment and tell us what you know about foreign transaction fees charged to travelers from Europe or Asia or anywhere else in the world. Knowledge is power (and money) people.

 

 

Credit card foreign transaction fee (updated 2/26/2010)
Issuer
Issuer fee
 

 

 

MasterCard/Visa fee
 

 

 

Total fee
 

 

 

American Express2.7%n/a2.7%
Bank of America2%1%3%
Barclaycard/Juniper2%1%3%
Capital Onenonenone0%
Chase2%1%3%
Citi2%1%3%
Discover2%n/a2%
HSBC2%1%3%
US Bancorp2%1%3%
USAA (available only to members of the military and their immediate families)none1%1%
Wells Fargo2%1%3%
Foreign ATM transaction fees
IssuerForeign ATM cost
Bank of America1 percent currency conversion fee at Global ATM Alliance ATMs/$5 plus 1 percent currency conversion fee at Non-Global ATM Alliance ATMs
Capital OneNo additional fees: $0 plus a 0% currency conversion fee. Refund of up to $10 per statement on ATM usage fees charged by other banks.
Chase$3 plus 3 percent currency conversion fee; for premium accounts, $0 plus 3 percent currency conversion fee
CitiCitibank ATMs: $0 plus a 3 percent currency conversion fee/nonCitibank ATMs: $1.50 plus a 3 percent currency conversion fee
HSBC$1.50 for each ATM withdrawal; no fee for Premier Debit MasterCard
USAA$0 plus 1 percent currency conversion fee
Wells Fargo$5 withdrawal fee

Source: CreditCards.com

 

 

 

(Visa and Mastercard) charge a 1% fee to the issuing bank that you hold your account with. A few of these banks merely pass on this 1% fee to you. Many take the opportunity to tack on their own fee, increasing the percentage that you pay to 2% or even 3%. A very, very few banks not only don’t charge their own foreign transaction fee but agree to eat the credit card companies’ 1% fee as well so their customers can enjoy fee-free ATM withdrawals and credit card purchases overseas.

That’s why we opened an E*Trade Financial checking account and that’s why we carry Capital One credit cards. Capital One is the only major credit card provider without a minimum balance requirement that we know of that does not charge a foreign transaction fee (and we’ve done exhaustive research).

However, we just learned (the hard way) that all E*Trade Financial ATM and debit cards now incur a 1% foreign transaction fee on purchases and ATM withdrawals outside the US  because the bank has decided to stop eating the 1% fee they’re charged and pass it on to customers (us) instead.

We just contacted Capital One, where we already have credit cards that are blissfully free of international transaction fees, and the company confirmed that their banking accounts are ALSO free of international transaction fees. We, like you, work hard to save money for travel and we’re also careful to conserve our money once we’re on the road. That’s how we’ve kept our Trans-Americas Journey going for almost four years now. We estimate that we’ve saved nearly US$1,000 a year by religiously avoiding ATM and credit card foreign transaction fees during our Trans-Americas Journey.

That’s why we are now in the process of closing our E*Trade checking account and opening a Capital One checking account and we would suggest that other travelers from the U.S. do the same.

Another thing to look for when you’re choosing a bank and credit card that’s most suitable for overseas travel is a policy of refunding a certain amount of the ATM fees you incur from domestic or foreign banks each month. For example, Capital One will credit your account up to US$10 per month in ATM fees charged by other banks—as long as the foreign bank codes the fee correctly which most major international banks do.