Beware of Extra Fees Overseas
by Brandi Savitt - January 25, 2012
The Cost of Traveling Abroad
Last week, in the dead of a long dark winter, I was fortunate enough to travel up to to the Arctic Circle in Norway to attend a film festival. And while I didn't get to see the Northern Lights, I did try whale sashimi (…is that legal?) and took a picture with a life size taxidermy Polar Bear…
Work brings me to Europe several times a year. And while any chance I get to write off sipping wine on the Rivera is a dream come true, my bank and credit card companies just love to find any sneaky excuse they can to charge me extra fees. So, if you're planning a trip to a foreign land, here's what you need to budget for so you have NO surprises when you go to pay your credit bill when you get home!
What is a Foreign Transaction Fee?
According to Credit Card Hub, the credit card foreign transaction (or international) fee is the combination of a fee that Master Card, Visa, etc charges to handle the transaction between the overseas merchant and your credit card issuer (eg. Chase, Citi, Bank of America), and the fee that your credit card issuer charges on top of that. Depending on the type of card, and its issuer, this fee is typically 2-3% of every purchase made!
Not So Hidden Fees
If you've used your credit card recently while traveling, or even if you've purchased something online from a foreign company, you may have noticed this separate, hefty surprise fee on your statement. I thought this was just a new type of fee that credit cards could now pass onto their customers, but I was wrong. It's always been there. But now the credit card companies are forced to point it out.
American Express explained to me that they've always charged a fee for foreign purchases, but they used to roll it into the total purchase number on the statement - essentially hiding their 2.7% foreign transaction fee from the naked eye! Luckily for us, now we can see for ourselves just how much extra we're getting charged for the privilege of traveling and spending money abroad!
Call Your Credit Card Company Before You Travel
Before you travel to another country, call each of your credit card companies and see which of your cards has the lowest foreign transaction fee. Then add that fee into your travel budget.
If you have an American Express Platinum Card, or another premium card, your international fee may be automatically waived. But don't rush out and apply for a premium card just to avoid the fees. Unless you travel abroad extensively, these premium cards may not be the worth the high annual fee.
…And just as a general note, while you have someone on the phone, you should always alert your card company that you will be leaving the country. This will help avoid them from freezing your card in fear that it was stolen.
Avoid Prepaid Cards
The new modern traveler's check seems to come in the form of a prepaid card that often advertises "NO FOREIGN TRANSACTION FEES." While purchasing a card that has already converted your money into the currency of your choice may seem like the way around the fee problem - it's NOT. While you may not get charged an international transaction fee, other fees to purchase the card in the first place are likely even higher! Not to mention, if you need to refill the card, more fees will be charged…
Additionally, you may only use these cards for purchases in the currency that you originally planned. Meaning…. if you have money left, you most likely won't be able to convert the money on the card back to dollars!
Don't Let Stores Convert You
If a store offers to convert your credit card transaction from the local currency into U.S. dollars - say NO THANK YOU! While it may be tempting not to have to do any extra math, merchants can charge as high as 7% of your total purchase for this "special service." -Remember, this charge is in addition to the fees your card will tack on…
Taking Out Cash Abroad
Typically, using your ATM overseas is the best way to get more favorable exchange rates on cash. But keep in mind, your bank is likely to charge you a higher fee than they would at home. Expect fees up to $6 or 3% of your total withdrawl - each time!
Budget an Extra 3%
While it may seem dauntingly unfair that we are charged more to use your own money abroad, the truth is, if you're lucky enough to have the luxury to travel - suck it up and budget properly for your trip. Adding in an extra 3% to your total budget is the safest way to make sure you won't overspend as a result of hidden fees!
Download the Xpense Lite App!
Want a Fab & Fru must do tip? On our trip to Norway, my colleague and I used the FREE Xpense Lite App to track our expense report for the trip - right on our smartphones. It was brilliant! By creating a new account for the trip, we were able to log in every receipt and instantly calculate (and automatically include) the credit card and ATM fees. In a brutally expensive place like Norway, this app totally helped us keep to our budget - including all the hidden expenses. I highly recommend it!
What are your tips for managing your money while traveling abroad?
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