If you ever travelled abroad you have undoubtedly faced the very unfair exchange rates at the local exchange bureaus – some rates can be as high as 10% off from the wholesale currency market. Fortunately, there is an existing alternative to this injustice.
There are some people who are seriously averse to using credit cards, but they could be quite a convenient solution in this particular case. First of all, credit cards are accepted virtually everywhere and there are cash machines all over the world to easily obtain foreign currency. Secondly, it is much safer and more convenient to carry cards than wads of domestic and foreign cash when you travel. Finally, the rate you get is much closer to the wholesale rate than you get by any other means.
The biggest concern with using credit cards is cost. Most credit cards charge foreign transaction fees when foreign currency is being used. They range anywhere between 0 and 3%. There are opportunities to find the lowest fee card possible (you need to check the fine print of your credit card agreement).
If you plan to withdraw foreign cash from an ATM, keep in mind that some ATMs do charge a hefty commission for the transaction. These fees are usually posted at the machine itself. At the same time, most banks in Europe do not charge any fees on getting cash from your credit card. However, this transaction will be considered a cash transaction by your credit card with all related complications. Most cards charge fees to obtain cash regardless of the currency, which could be as high as 5% and may have a fixed minimum like $5. Credit cards also start charging interest as soon as transaction is processed. To manage these issues, you should find the card with the lowest fees and cash advance interest charges. Also, prior to the trip you should pay off the entire balance (and may be some extra), and pay the new balance off immediately at your arrival back home. This will help you to keep average balance at the minimum and avoid interest charges altogether.
Finally, not all cards are accepted everywhere. Visa, just as they claim, is the most widely accepted, closely followed by MasterCard. American Express is slightly less popular. Such cards as Discover, Diners Club and JCB are virtually unheard of in most countries outside of major hotels and airlines. There are other acceptability issues as well. For example, credit cards issued by American banks (Citi, Amex, Capital One) are not accepted in Cuba due to embargo. Some other countries are also suspicious of foreign cards, especially when used for online purchases.
So, you need a card that is accepted at your destination and carries the lowest combined fee for foreign transactions and cash advances, if you plan to withdraw cash, or just foreign transactions fore regular purchases. At the end of the day, even with all the fees, it could be much cheaper and safer to use your card abroad instead of carrying cash or travellers cheques (with their own fees and acceptance issues).
Domestic Amount = (1 + Cash Advance Fee %) x (1 + Foreign Transaction %) x (1 + ATM fee %) x Foreign Amount
Or (Min Cash Advance Fee) + (1 + Foreign Transaction %) x (1 + ATM fee %) x Foreign Amount
There are some people who are seriously averse to using credit cards, but they could be quite a convenient solution in this particular case. First of all, credit cards are accepted virtually everywhere and there are cash machines all over the world to easily obtain foreign currency. Secondly, it is much safer and more convenient to carry cards than wads of domestic and foreign cash when you travel. Finally, the rate you get is much closer to the wholesale rate than you get by any other means.
The biggest concern with using credit cards is cost. Most credit cards charge foreign transaction fees when foreign currency is being used. They range anywhere between 0 and 3%. There are opportunities to find the lowest fee card possible (you need to check the fine print of your credit card agreement).
If you plan to withdraw foreign cash from an ATM, keep in mind that some ATMs do charge a hefty commission for the transaction. These fees are usually posted at the machine itself. At the same time, most banks in Europe do not charge any fees on getting cash from your credit card. However, this transaction will be considered a cash transaction by your credit card with all related complications. Most cards charge fees to obtain cash regardless of the currency, which could be as high as 5% and may have a fixed minimum like $5. Credit cards also start charging interest as soon as transaction is processed. To manage these issues, you should find the card with the lowest fees and cash advance interest charges. Also, prior to the trip you should pay off the entire balance (and may be some extra), and pay the new balance off immediately at your arrival back home. This will help you to keep average balance at the minimum and avoid interest charges altogether.
Finally, not all cards are accepted everywhere. Visa, just as they claim, is the most widely accepted, closely followed by MasterCard. American Express is slightly less popular. Such cards as Discover, Diners Club and JCB are virtually unheard of in most countries outside of major hotels and airlines. There are other acceptability issues as well. For example, credit cards issued by American banks (Citi, Amex, Capital One) are not accepted in Cuba due to embargo. Some other countries are also suspicious of foreign cards, especially when used for online purchases.
So, you need a card that is accepted at your destination and carries the lowest combined fee for foreign transactions and cash advances, if you plan to withdraw cash, or just foreign transactions fore regular purchases. At the end of the day, even with all the fees, it could be much cheaper and safer to use your card abroad instead of carrying cash or travellers cheques (with their own fees and acceptance issues).
Domestic Amount = (1 + Cash Advance Fee %) x (1 + Foreign Transaction %) x (1 + ATM fee %) x Foreign Amount
Or (Min Cash Advance Fee) + (1 + Foreign Transaction %) x (1 + ATM fee %) x Foreign Amount
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