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Paying With Plastic Abroad

If you're traveling internationally and you plan to pay for many expenses with your trusty credit card, become better informed before doing so. As fellow Fool Dayana Yochim recently discussed in her article about beating vacation fees, while credit cards tend to offer decent currency exchange rates, the foreign transaction fees charged by many cards are significant and have been rising. If you don't find out exactly what charges to expect on your post-trip bill, you might be in for a nasty surprise.

Nearly every card assesses international transaction fees outside the U.S., with Visa and MasterCard charging a 1% fee and most banks tacking on something extra for themselves. Total fees of up to 3% are common among banks like Wells Fargo (NYSE: WFC  ) , Citigroup's (NYSE: C  ) Citibank, and Bank of America (NYSE: BAC  ) . On the other hand, Capital One (NYSE: COF  ) not only skips its fee, it also covers that 1% charged by Visa and MasterCard. In other words, the total fees with Capital One come to ... 0%.

Since it's hard to beat the convenience of paying with plastic abroad, try to simply be smart about your usage. If you plan to do a lot of spending, perhaps use a card that will charge you the least in fees. Imagine, for example, that you spend $5,000 abroad. If your fees total 4%, that comes to $200. If they total 0% ... well, you get the picture.

As it turns out, you may be able to get a refund on some of the foreign transaction fees you paid in recent years. A class action lawsuit resulted in a settlement that covers transactions all the way back to Feb. 1, 1996. Check out this website for more details.

More tips
Travel expert Rick Steves offered these notes on his website:

Credit cards work fine throughout Europe (at hotels, larger shops and restaurants, travel agencies, and so on), although more and more merchants are establishing a $30 minimum. Visa and MasterCard are the most widely accepted. American Express is less common (because it costs merchants more) but is popular with some travelers for its extra services. The Discover card is completely unknown in Europe.

Plastic fans gloat that you get a better exchange rate by using your card. This may be true, if you have the right kind of card. But there are plenty of fees involved (typically about 1-3% per transaction). Also, realize that you're buying from businesses that have enough slack in their prices to absorb the fees the credit card company charges the merchant (2-5%). In other words, those who travel on their plastic may be getting a better rate, but on a worse price.

Learn more
Learn much more about the surprisingly interesting credit card industry in our Credit Center, which also features tips on getting out of debt, along with guidance on how to manage your credit effectively. You'll find some great information, and it's all free reading.

The following articles can also help you:

Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article. Bank of America is a Motley Fool Income Investor recommendation. MasterCard is an Inside Value selection. Try any one of our investing services free for 30 days. The Motley Fool is Fools writing for Fools.

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