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Question: I'm planning to travel in Europe
this summer and have heard that some credit cards
are tacking on extra charges. What's the best way
to pay for things in foreign counties?
Answer: Credit cards often have been used by
savvy travelers for protection and because the
cards offer favorable exchange rates when making
purchases in foreign countries. Credit cards are
still a good alternative to carrying a wallet
bulging with cash, but beginning in May, many
credit card purchases will exact a higher
surcharge.
Visa and MasterCard have long added a 1
percent charge to expenditures. You probably never
noticed because the charge was factored into the
amount converted from foreign currency to dollars.
This charge often was much less than the
commission you payed to covert cash or credit
cards to foreign currency.
Now many issuing banks will be adding an
additional amount to your credit card bills for
their profit. They can charge what they want -
some add as much as 5 percent to your charges,
while the average is 2 percent. When this is added
to the Visa/MasterCard charge, you're looking at
paying at least 3 percent to your credit card. One
reason that this recently became big news is that
the million-plus United Airlines Mileage Plus
customers soon will have this surcharge added to
their purchases.
What are your alternatives? If you plan to
charge $4,000 on your credit card with the
additional 2 percent surcharge, you'll pay an
extra $80 to use the card. There are still banks
and credit unions that issue credit cards without
the added surcharge, but you'll give up the
opportunity to earn frequent-flyer miles.
You can use your ATM card. There will be
additional charges from the foreign ATM and your
own bank may also add ATM charges. Some credit
unions do not charge an ATM fee to their members.
The fee is often fixed so that, the more money you
take out, the lower the cost of using an ATM.
However, you don't want to carry too much cash.
You should check with your ATM issuer to find out
what the maximum withdrawal is per day. (Always
use the withdrawal choice on the ATM machine. The
fast-cash option is generally much less than the
amount you can withdraw.)
Changing dollars or traveler's checks may
carry the highest fees, especially at airports.
You could try to get travelers checks in foreign
denominations before you go, but don't be
surprised if smaller hotels and restaurants won't
accept them.
Finally, don't use a cash advance from your
credit card. With additional charges, this can be
the most expensive option of all.
For more information, contact your local
Colorado State University Extension office. |
