Almost all of you know how easy it is to avoid the fees on foreign credit card charges. Most big banks now issue at least one no-foreign-fee version of their cards, especially those that target travelers. But when you travel outside the U.S., you still face two significant exchange gotchas that can hit you for up to 10 percent of the transaction.
Time was, you could find ATMs from major local banks in the international arrivals areas of just about every foreign international gateway airport. Barclay's, PNB, Deutsche Bank, you name it: Debit-card cash withdrawals were subject only to the usual fees, typically either about $3 per transaction, or up to a 3 percent conversion fee. And many U.S. banks issue debit cards that either omit or forgive foreign withdrawal fees.
But about two years ago, big airports started cutting deals giving exclusive ATM rights to a single operator. And, in most cases, that operator isn't a giant full-service bank; instead, it's the same outfit that runs the airport's currency exchange desk. Often, it's Travelex, but you also see American Express, Moneycorp, and others.
The gotcha is obvious: Although the machines tout "no fee," they give you the same lousy exchange rate you'd get at the exchange counter. And that can cost you far more than the usual withdrawal fee—as much as 10 percent, compared with using a real bank's ATM.
More recently, ATMs operated by exchange outfits are turning up in downtown locations as well as airports. They feel like a scam, but they’re not out-and-out frauds; technically, they are actual ATMs. But they’re not affiliated with a conventional bank, and they’ll gouge you on the exchange rates, same as at airports.Even when you have no carry-over foreign currency from a previous trip, however, you can easily avoid the gouge:
All too often, at a foreign hotel, restaurant, or rental car counter, the clerk/waiter/agent will suggest that for your "convenience" he or she will be happy to charge you in dollars rather than local currency.
The gotcha here is that the hotel, restaurant, or rental car company sets the exchange rate—a rate that is almost always much worse than the rate the international banking system gives you. And if that gouge isn't enough, even when your charge is in dollars, your bank will still add whatever fees it adds to all foreign transactions.
Your remedy here is obvious: Outside the U.S., always insist that your credit card charge is in local currency, not dollars. You'll avoid gouges as high as 10 percent.
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