November 17, 2008
Attention worldly travelers. Even with the dollar rebounding somewhat, unfavorable exchange rates and high airfare are enough to put a damper on your overseas adventure. But if you want to spare yourself an unpleasant memento when your credit card bills arrive, you'd better find out how much how you pay for purchases overseas will pad your tab.
Although credit cards are certainly convenient (particularly if you don't want to ruin the perfect line of your suit with a money belt stuffed with cash), they can add as much as 5% to the purchase price of everything you buy overseas.
The cost of using credit overseas
There are two major fees that lenders charge customers: currency conversion fees (typically 1% of your total transaction) and foreign transaction fees (which can run an additional 1% to 3%). The fee is based on a percentage of the U.S. dollar value of your overall purchase.
For example, American Express (NYSE: AXP ) doesn't charge a foreign transaction fee, but it does carry a 2% currency conversion fee. Capital One (NYSE: COF ) picks up the tab for both, as does Discover (NYSE: DFS ) -- though Discover is not as widely accepted overseas as cards branded with Visa (NYSE: V ) or MasterCard (NYSE: MA ) .
In May, the folks at indexcreditcards.com surveyed major card companies and came up with this list -- from lowest to highest -- of foreign transaction fees for issuers:
- Capital One: 0% transaction fee. (Capital One does not impose a fee, and it also eats the 1% fee that Visa or MasterCard impose.)
- Discover: 0% transaction fee. (Note, however, that Discover is accepted on a limited basis outside of North America.)
- Washington Mutual/Providian: 1% transaction fee.
- American Express: 2%.
- Pulaski Bank: 2%.
- Barclays/Juniper Bank: 2% to 3%, depending on card.
- Bank of America (NYSE: BAC ) : 3%.
- Chase: 3%.
- Citibank: 3%.
- GE Money: 3%.
- HSBC: 1% to 3% depending on card.
- US Bancorp (NYSE: USB ) : 3%.
- Wells Fargo: 3%.
Before you leave home for exotic locales, call your credit card company and find out what it charges for overseas transactions. Don't reach for your wallet until you know how much your lender charges to use its card.