Our travel budgets are likely to be pretty tight this summer -- AAA's recently released report estimated that the average American family will spend $809, down from $876 in 2009. Most people, they say, will be staying close to home.
Even if you're one of those who's bucking the trend -- maybe you've been saving up all year for an overseas vacation, or you scored tickets to Europe on super sale -- you're likely to have a tight budget as well. The last thing you want is to lose a chunk of it to credit card fees, especially when you haven't planned for them.
When you use an American credit card abroad, most companies assess an international transaction fee no matter how much your purchase adds up to, says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. The charges add up fast: The company that processes the transaction, like Visa or MasterCard, generally charges your card issuer 1% to convert the currency, and in turn, the card issuer charges you a fee of 2% or even 3%.
Here are some tips for avoiding -- or, at the very least, minimizing -- these costs:
Find Out About Fees Upfront
When it comes to your credit card bill, a surprise is rarely a good thing. The last thing you want is to carefully stick to your budget, only to return home and find that your credit card bill is a couple hundred dollars more than you expected because of foreign transaction fees. If you know about them, you can plan for them.
While you have your bank on the line, be sure to ask about ATM fees, which may pop up in addition to the international transaction fee, says Hardekopf. Some banks, he adds, are members of alliances that allow you to use your debit card at partner banks in other countries for no charge. My suggestion? Be careful with the debit card when you're traveling, period: It provides fewer protections against fraud than a credit card.
Fees on cards vary widely. While I wouldn't suggest getting a new card just for an international trip -- unless you don't have one at all, or you're in need of a new one anyway, and you plan to pay it and your other cards off in full at the end of each billing cycle -- you should definitely do a little research to figure out if one of the cards in your wallet is less expensive than others. Believe it or not, you can even find cards that charge nothing at all for international transactions.
Tatiana Stead, a spokesperson for Capital One, tells me that the bank absorbs the 1% fee charged by Visa and MasterCard and doesn't charge any fees of its own. Likewise, Pentagon Federal Credit Union in Virginia recently eliminated foreign transaction fees on its PenFed Premium Travel Rewards American Express card. Just keep in mind that some cards may not be widely accepted in other countries. Hardekopf points out that Discover doesn't have an extensive network in Europe.
Let the Bank Know Your Whereabouts
You should always notify your bank or credit card issuer when you're planning to travel out of the country. They'll put a note on your account. Otherwise, they may suspect fraud and freeze your funds or line of credit -- certainly not a good way to start your vacation.
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