If you're planning a trip to a foreign country this summer, you might want to review your credit card companies' policy on foreign transactions. While a limited number of companies charge no foreign credit card fees, most companies charge 3% on every transaction you make when traveling abroad.
While 3% may not seem like a big deal, it can add up quickly. Spending $3,000 in a foreign country can cost you an extra $90. Plus, some credit card companies may even charge you foreign transaction fees for international transactions you make in the U.S. The most costly charge: hotel rooms.
Bank of America and Chase, for example, charge consumers a 3% fee for foreign currency transactions even if they are made in U.S. dollars. Thus, if you book a hotel online, you may end up paying this fee. If your hotel room costs $2,000, expect to pay $60 in foreign transaction fees.
One way to avoid foreign transaction fees is to use your debit card instead of your credit card. This is generally not the best option, however, because debit cards have less fraud protection than credit cards. If your debit card is lost or stolen, you might find yourself spending half your vacation on the phone trying to get your funds reinstated.
Because of the problems debit cards pose, using a credit card is the safest and easiest way to spend money abroad. The best credit cards to travel abroad with will bear the Visa or Mastercard logo. These cards are the most widely accepted in the world and anyplace that accepts credit cards will likely accept these. American Express is widely accepted abroad, but not to the same extent as Visa or Mastercard. This is especially true in remote areas outside of city centers and with smaller establishments.
Ultimately, if you wish to avoid foreign transaction fees, the only major credit card company that issues Visa and Mastercards and does not charge this fee is Capital One. With one of their credit cards, you can save $150 on $5,000 of spending abroad while still enjoying the safety credit cards provide.