How to Avoid Travel Spending Fees

Photo: Matt Biddulph

Planning a trip abroad? Have a great time, and don’t worry about traveler’s checks: wherever you’re going, no matter how piña colada and palm-frond-oriented, they probably have a full array of ATMs and credit card terminals to keep you happy.

But be forewarned: pickpockets have their eye on your wallet. Their names are Visa, Mastercard, Citibank, and a host of other light-fingered financial professionals.

These guys have a few strategies for draining your cash. You can’t avoid all of them, but you can do a lot better than the naive traveler. And, to be fair to the companies I just referred to as pickpockets, modern exchange services do make travel a lot easier, and it doesn’t seem unreasonable to pay a few bucks for that. It’s like air travel: you rarely get to fly free, but only a sucker pays full price.

Here are the fees you’re likely to come across when spending abroad with a credit card, debit card, or ATM withdrawals:

• ATM out-of-network fees. This flat fee (typically $5) is charged by your bank for using a foreign ATM. Generally, big banks charge it; community banks, credit unions, and online banks don’t.
• Bank ATM fees. This is the fee charged by the bank that owns the ATM you’re using. You’re more likely to come across this in some countries than others. (And if you’re visiting the US from abroad, I would like to personally apologize, because the US is the worst offender here.) Some banks–particularly online banks–automatically reimburse you for this type of fee. Ally Bank, for example, reimburses all ATM fees.
• Foreign exchange fees. Visa and Mastercard charge you a percentage fee on all foreign transactions, and banks typically tack on a percent or two on top of that. The fee (up to 3% total) usually applies to credit, debit, and ATM transactions. This can add up fast. Capital One credit cards waive this fee entirely. (So does Discover, but who takes Discover?) If you travel a lot, carry a Capital One card–if you can qualify, that is; they’re sticklers for a high FICO score. For a trip to Japan next month, however, I’m not going to bother applying for a new card; I’m using my credit-union-issued card, which charges a flat 1%. I can live with that.
• Cash advance fees. If you use your credit card to withdraw cash at an ATM, you will pay and pay. Unless it’s an honest-to-God emergency, don’t do this.
• Exchange rates. This is the sneakiest of all, because it’s hidden. When using a credit or debit card, you generally receive a fair exchange rate, a wholesale rate comparable to what’s published in the Wall Street Journal or the Universal Currency Converter. (If you get a rate that differs significantly from this, call your bank and complain.) At an airport currency counter, you’ll get an unfavorable rate. Worst of all is exchanging cash at a store. And if a merchant offers to ring up your credit card transaction in US dollars to avoid the foreign exchange fee, decline unless you can check the exchange rate on the spot.

Your bank’s web site is unlikely to be forthcoming on what they’re going to charge you when you travel. Call the bank and walk through two specific scenarios with them: what will you charge me, in total, when I use my card at an ATM in Barbados (or wherever you’re planning to drink your piña coladas)? What about when I use it as a credit or debit card?

Furthermore, it pays to do this before you book your trip. Banks have been known to charge the 3% exchange fee for, say, booking a flight on an international airline, even when the trip is booked in dollars.

Before you go

If you’re traveling to a place you’ve never been before, it pays to find out what the payment landscape looks like. Is plastic widely accepted? Are ATMs ubiquitous? Will they accept your card?

A little Googling here goes a long way. People who travel love to talk about the gritty details. (TripAdvisor is a particularly good resource.) A search for “Japan ATM cards” informed me that Japan is relatively cash-oriented compared to the US, and that my Mastercard-logo card won’t work in most Japanese ATMs, but it will work in ATMs at the post office. There’s a post office near my hotel, so I expect this won’t be a problem. Just in case, though, I’m bringing some Japanese cash with me.

I have an account with Chase, and my neighborhood branch was happy to order me up some yen. It took one business day to fulfill my order. This being the future, I was able to pull up the Currency app (free) on my iPhone to make sure I was getting a fair rate.

Unsurprisingly, I wasn’t: Chase charged me a larcenous 5 percent surcharge over the nominal exchange rate. Which illustrates an important point: don’t waste too much time figuring out how to save a few bucks on your first couple hundred dollars of foreign money. (That’s what I’m telling myself, at least.)

Should you bother to get foreign cash before you go? Probably not. It depends to what extent you’re heading into the unknown. This is my first trip to Japan and I will have a six-year-old in tow, so I decided to grease the wheels as much as possible. I expect to learn upon arrival that it would have been easier and cheaper to hit an ATM at the airport, but I’m just as happy not to have to figure out how to use a Japanese ATM (or whether my card will even work in this particular one) first thing after a ten-hour flight with a sleepy child clinging to my leg.

Finally, for any credit or debit card you’re planning to take on your trip, flip the card over and call the 800 number. Tell them where you’re going and when. But be prepared to have your card declined sometimes anyway: bring multiple cards, and keep a cash stash. The last thing you want is to have to explain why you can’t pay for that piña colada you just finished.