We all love the convenience of using our credit cards when traveling overseas. However, you may not realize how much extra money you are paying to use them. Let’s look at some of the pros and cons of using your credit card overseas.
Did you know that banks overseas make millions from credit card usage overseas? Just about 70 percent of people who own credit cards don’t know that the credit card companies tack on tons of additional fees and surcharges. When they get back from traveling, the damage has been done. If you didn’t know this, there’s a lot more you probably don’t know.
When you swipe your card overseas, you can be charged up to 2.75 percent of every single purchase you make. This is charged as an exchange rate fee or “foreign fee for usage”. What this means is that if you have a charge on your card for $1000.00, your credit card bill will show about $1027.50.
In the event that you need cash when abroad, you likey don’t want to withdrawal it from your credit card. This can result in even astronomical fees. Think about it – normally a cash advance on any card in the US will have a very high fee. You may then have to pay additional fees because you withdrew it overseas. Then, the ATM will likely charge something like 2 euros or 40 rupees or something seemingly small, just for using that machine. However in foreign countries, ATMs are not required to ask you if you approve. As if it needs to be said, this can add up to a lot of money you didn’t realize was going to be charged.
In the old system of converting currency, if you used a credit card for a purchase, you would pay the actual local currency amount. Visa and Mastercard will convert the price to whatever currency your country uses when you get home. Because the exchange rates are up and down, you may pay a lot more or a lot less for your purchases. With the new conversion system, the vendor will give you the equivalent amount of money in your exchange rate country when you make the purchase. This tends to help you budget more when you are traveling abroad and not be left surprised when you return home.
Something you need to be aware of when traveling abroad is that not all stores and restaurants will accept a credit card, so you need to have cash available with you always. You can usually always find cash from an ATM machine, but there will be additional fees assessed. Unless you’re traveling in the most overcrowded resort or highly developed Western European countries, never solely rely on credit cards.
Keep in mind that not all credit card companies are going to charge the same fees and rates. If you plan to travel abroad, it’s a good idea to call your credit card company and talk to them about negotiating a standard foreign rate to use the card. If that doesn’t work, use a card that charges the lowest fees and additional costs associated with it. Capital One is a great option – they never charge anything for being abroad.
Kayla Scott writes about travel, finance & consumer safety at http://creditscore.net.