Wednesday, May 25, 2016

Going Overseas? Save Money On Foreign Transaction Fees With The Right Credit Card

In the old days, when you traveled overseas, the best way to protect yourself against lost or stolen funds was to use traveler's checks. You would go to your bank and purchase checks in the currency of the country you were visiting. You signed the checks in the bank when you bought them and again in the store when you spent them. The merchant in the foreign country would accept these checks as cash equivalent providing the two signatures matched. If they were somehow lost or stolen, you could get replacements sent to you just about anywhere in the world. American Express was a major provider of traveler's checks. I remember going to Europe when I was in high school and using these, back in the Stone Age.

These days, while still in use, traveler's checks are becoming archaic. Most of Europe has standardized on the euro as a common currency, so there is no need to get different currency for different countries. More importantly, credit and debit cards have made huge gains over the last couple decades and they are now accepted almost everywhere. The card you use at Wal-Mart in Phoenix can also be used at Comme des Chaussures in Paris.

The problem with cards is that most issuers will charge you a foreign transaction fee. Your purchase will be posted in the native currency of the foreign country, then converted into U.S. dollars on your bill. Immediately after that, you'll often see an additional charge, usually around 3% of the purchase price, added on as a fee. With changing currency rates, it's hard enough to figure out how much something costs in another country without having to worry about another 3% fee added in. Luckily, there are some credit cards that do not charge this fee.

My family is planning a trip to Germany at the end of the year, so I started shopping around for such a card. A great resource is Nerd Wallet and their list of Best No Foreign Transaction Fee Credit Cards. Many of these cards are geared towards frequent travelers, which is not surprising, so their rewards tend to be focused on airline perks. I opted for the Bank Of America Travel Rewards card because it has no annual fee. It comes with a 0% introductory rate for the first 12 months. Additionally, if I spend $1,000 in the first 3 months, I get 20,000 points, which translates to a $200 statement credit on travel-related purchases. I like this because it's a straight statement credit. I don't have to worry about using points for a hotel stay somewhere or trying to fly while avoiding black-out dates. (Just give me my rewards and don't make me jump through hoops, you twisted bastards!) If you have a checking or savings account with B of A (I don't),  you'll get a 10% bonus on all points earned.

I don't really want another credit card and I plan to cancel this one as soon as our trip is over. However, I did want a card that would allow me to purchase lederhosen, beer and bratwurst while avoiding foreign transaction fees. I mean really, who can pass up the opportunity to look like this?

If you are planning to go overseas, it pays to look into a card with no foreign transaction fees. Also, be sure to stick with major card issuers like Visa or MasterCard. I've been overseas a couple of times and I know that American Express is not widely accepted. I don't think I saw any place that accepted Discover cards.

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