How To Avoid Bank Fees When Traveling

Last week we wrote about how to get the best exchange rate when you change money overseas. We recommended you bring cash with you and change your money in a local bank. Another good option we talked about was to use your ATM card at a bank and draw cash directly form the machine. While you’ll get a good rate, watch out for fees both the local bank and your bank back home will charge for the transaction. While the rate itself may be decent, when include the lost funds from the fees you may end up getting a fairly poor rate of conversion. I bring up the topic again because the Mint Life blog has a particularly good article on avoiding bank fees while traveling. I’ve reproduced part of the article below, but make sure to head over there to check out the full article if you want to get all the details. The link is beneath the quote.

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.

Read the full article over at the Mint Life blog. It’s one of the few blogs form which we actually read each article. I highly recommend you do the same!

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