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Study: Credit, debit card users can save 10% on purchases when traveling abroad

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Summer is a busy time for travel and international destinations are on many people’s hot lists. One of the things people don't usually think about is how to stretch travel dollars by astute currency conversion. A leading credit card comparison website CardHub released its 2014 Currency Exchange Study in order to help travelers save money on purchases processed abroad. The study found that credit and debit card users can save 10% over converting dollars to foreign currency.

The study compared currency conversion rates and fees from Visa, MasterCard, the country’s 15 largest banks, and Travelex. Here are highlights of the findings:

  • On average, the cheapest way to convert currency is to do so automatically with a no foreign transaction fee credit card or a no foreign fee debit card on the Visa or MasterCard network. The average bank and Travelex location charge 6.73% and 10.17% more, respectively.
  • While the cost differential between major card networks and the financial institutions that provide hard currency conversion services remains substantial, it has declined 17% for banks and 37% for Travelex since 2012.
  • The two major banks with the worst currency conversion deals are SunTrust and U.S. Bank. SunTrust charges $1.4813 for 1 Euro and has a $10 conversion fee. U.S. Bank charges a 1.4936 exchange rate and a $9.95 fee.
  • CardHub surveyed 35 of the 50 largest credit unions, and only four offer currency conversion services: State Employees Credit Union, First Tech Federal Credit Union, Citizens Equity First Credit Union, and ESL Federal Credit Union.
  • On average, the cost of currency conversion varies little between banks and credit unions, with the latter being 1.65% less expensive.

For the full study, visit: http://www.cardhub.com/edu/currency-exchange-study/

Here are more tips from CardHub for international travelers:

1. Use a no foreign transaction fee credit card for the majority of international spending (this includes purchases made through foreign-based companies while still in the United States)

It’s common for international travelers, especially first-timers, not to feel ready to leave until they’ve got some of the hard currency used in their destination country. It’s just one of those things that’s traditionally been recommended.

But with the banking system becoming increasingly digital, it makes sense for the easiest way to buy things in a foreign currency to be with plastic. Why waste the time exchanging physical currency and risk carrying it around when a credit card handles the process automatically and gives the best possible exchange rates in the process? You’re going to save relative to a bank or airport kiosk exchange no matter what card you use, but getting a credit card with no foreign fees is an easy way to reduce costs even more. Just remember to get such a card before booking anything through a foreign-based company because if the transaction gets processed outside of the U.S., it will trigger a foreign surcharge.

2. Bring a debit card with low international ATM withdrawal fees as well

You’re going to need cash at some point in your trip – whether it’s for a cab, tipping a bellboy, or something else entirely. The best way to accommodate that need is to bring a Visa or MasterCard debit card, as long as it doesn’t charge too much for international ATM withdrawals. This will enable you to not only get the same low exchange rate as with your credit card, but you’ll also be able to take out cash as needed and reduce the damage a pickpocket could do.

3. Notify your bank of your travel plans

Banks will suspend your credit and debit cards due to suspicions of fraud if you do not alert them to the fact that you’re traveling out of the country. This might actually be a good idea even if you’re traveling domestically because banks have been known to suspend accounts that display transactions outside one’s normal geographic area.

4. Get the phone number to call your bank collect

If your card gets lost or stolen, being able to contact your bank will not only help nip any potential fraud in the bud, but most banks will also overnight you a new card. The bank will pay for the call too, so you needn’t worry about international charges.

5. Steer clear of dynamic currency conversion

If a merchant offers to convert your purchase total from the native currency to U.S. dollars, they might be trying to help you out. Or they could be looking for an excuse to apply a high exchange rate and squeeze a bit more money out of you. It’s best not to find out, especially when you can use your phone or a small pocket calculator to make quick conversions and better understand how much things cost.

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