Card Fees (and How to Avoid Them)

Credit cards are of course incredibly useful overseas — but often come with unexpected extra costs.
By Rick Steves

Travelers returning from Europe often open their mail to discover they paid more for their trip than they thought they had. Over the last decade, banks have dramatically increased their fees for overseas transactions. While these fees are legal, they’re basically a slimy way for credit-card companies to wring a few more dollars out of their customers.

Visa and MasterCard levy a 1 percent fee on international transactions, and some banks that issue those cards also tack on a currency conversion fee (additional 1–3 percent). These are similar to the fees associated with using your debit card for ATM withdrawals.

So, how can a smart traveler avoid — or at least reduce — these fees? Here are a few suggestions.

Ask about fees. Banks are required to break out international transaction fees as line-items on your statement, helping you to see exactly what you’re paying. But by the time you get your statement, it’s too late — so it’s smart to make a call before your trip to get the whole story. Quiz your bank or credit-card company about the specific fees that come with using their card overseas.

If you’re getting a bad deal, get a new card. Some companies offer lower international fees than others — and some don’t charge any at all. If you’re going on a long trip, do some research and consider taking out a card just for international purchases. Capital One has a particularly good reputation for no-fee international transactions on both its credit cards and its debit cards linked to a checking account. Most credit unions have low-to-no international transaction fees. Bankrate has a good comparison chart of major credit cards and their currency-conversion fees.

Avoid dynamic currency conversion (DCC). Some European merchants — capitalizing on the fact that many Americans are intimidated by unusual currencies — cheerfully charge you for converting their prices to dollars before running your credit card. Dynamic currency conversion may seem like a nice perk, but you’ll actually end up paying more. The dollar price is usually based on a lousy exchange rate set by the merchant — and to make matters worse, even though you’re paying in “dollars,” your credit-card issuer may still levy its standard foreign-transaction fee. The result: the “convenience” of seeing your charge in dollars comes at a premium.

Some merchants may disagree, but according to DCC provider Planet Payment, you have the right to decline this service at the store and have your credit-card transaction go through in the local currency. If you’re handed a receipt with two totals — one in the local currency and the other in US dollars — circle or check the amount in the local currency before you sign. If your receipt shows the total in dollars only, ask that it be rung up again in the local currency.

Independent ATMs may also try to confuse customers by presenting DCC in misleading terms. If an ATM offers to “lock in” or “guarantee” your conversion rate, choose “proceed without conversion.” Other prompts might say “You can be charged in dollars: Press YES for dollars, NO for euros.” Always choose the local currency in these situations.

Don’t bother with prepaid cards. It’s possible to buy prepaid “cash cards” — which you load with funds before you leave, then use like any other credit or debit card — but they come with high fees and aren’t worth considering for most trips.

The Bottom Line: Here’s the best formula for saving money as you travel. Pay for most items with cash (use a bank that charges low rates for international ATM transactions, and withdraw large amounts at each transaction — keeping the cash safe in your money belt). When using a credit card, use a card with low international fees, and make sure your transactions are charged in the local currency — not dollars. Then smile and enjoy your trip, feeling very clever for avoiding so much unnecessary expense.