Avoiding Big Foreign Currency Surcharges and Fees When Traveling Abroad

Key Link Chase Sapphire Preferred Visa.

  • No foreign transaction fees.
  • 40,000 points after spending $3000 within 3 months
  • No fee the first year
  • Double points on all travel and restaurant spend
  • Points transfer to United, British Airways, Korean Airlines, Southwest, Amtrak, Hyatt, Marriott, Ritz-Carlton, and Priority Club.

My best credit card advice gets turned on its head when I leave the United States. For years I would tell people “put away the rewards cards, it’s not worth the 3% foreign currency transaction fee.” I actually found myself recommending Capital One cards because they didn’t add the 3% foreign currency charges to transactions outside the U.S.

And I still caution folks on rewards cards, because many of the best ones do add the fee. I love my Starwood American Express for most types of spending, basically for anything that isn’t bonused by another card and at merchants who accept American Express. But even though the card earns double points at Starwood hotel properties, I won’t use it at a Westin or Sheraton outside the United States because of the foreign currency conversion fee.

Fortunately, several cards – especially many Chase cards – have eliminated the fee. So you can earn rewards at the same time you’re avoiding the 3% surcharge on international transactions.

For the few months I had my Hyatt Visa before getting the Chase Sapphire Preferred I was in the awkward position of handing the Starwood or Hilton checkout clerk my Hyatt credit card. I wasn’t going to pay the darned fees even if I had to hand them Hyatt branded plastic!

Of course at any checkout desk the most important thing is to decline their offer to convert the bill to US dollars for you, instead of having your card company do it.

Remember that they are going to make the conversion at their own rate, and this is a profit center for them. Furthermore, cards that charge you 3% for foreign transactions generally do so regardless of the currency in which the transaction is made, they’ll usually apply the charges to any transaction originating outside the United States whether in dollars or some other currency. So if the hotel does it, you get whacked twice — an unfavorable exchange rate from the hotel and the 3% foreign transaction fee from the credit card company..

It goes without saying that while convenient to have the hotel exchange foreign currency for you, you won’t get an especially favorable rate, in general the best rates are going to be found taking money out of an ATM machine, where you’ll get your bank’s rate for the conversion. Of course you may be charged a fee by the ATM owner to use the machine, and possibly by your bank for using another bank’s ATM. I use a BankDirect checking account and they don’t charge me out of network ATM fees, and they rebate charges to use a competitor’s ATMs since they don’t have an ATM network of their own.

If I wind up taking out too much cash, I don’t convert it back to US dollars since I’d again incur a fee. I usually pay down my hotel bill with the excess local currency. Another trick is that in several countries you can add money to a US Starbucks card in the local currency, and let Starbucks do the conversion for you.

But anyone that travels internationally should have a no foreign transaction fee credit card in their arsenalEven if the card has an annual fee, you’ll cover a $90 fee after $3000 in spend outside the U.S. and that completely ignores the benefits of the points accrued from that spending.

My favorite no foreign currency transaction fee cards:

  • Chase Sapphire Preferred Visa. This also happens to be one of my favorite cards for use in the United States, so it’s doubly valuable since I earn the same rewards and without a foreign transaction fee when traveling abroad. Double points on all travel and restaurant spend (which is most of my spending abroad anyway!). Visa acceptance. And points transfer to United, British Airways, Korean Airlines, Southwest, Amtrak, Hyatt, Marriott, Ritz-Carlton, and Priority Club. There’s no fee the first year and 40,000 bonus points after spending $3000 on the card in the first three months.

  • American Express Platinum. A great card for the benefits, the lounge access benefits extend beyond just American, Delta, and US Airways because the card comes with a Priority Pass Select membership that offers access to lounges around the world. And no fee.

  • Hyatt Visa. This was the very first no foreign currency transaction fee card I signed up for, the signup bonus is two free nights at any Hyatt property. Hyatt Platinum members also get confirmed suite upgrades, and Hyatt Diamonds get their free nights in a suite (I used mine at the Grand Hyatt Singapore). For the most part it’s been superceded in my wallet by the Sapphire Preferred card, but I keep it for the annual free night (up to category 4 hotels, which currently includes the Hyatt 48Lex in Manhattan, worth the $75 annual fee) and to earn 3 points per dollar at Hyatts. And rumor has it they’ll be improving the benefits of the card shortly.

  • Chase Ink Bold Charge Card which gives 50,000 bonus points after $5,000 in spend within 3 months (and here are ways to make meeting your minimum spend easier), no fee the first year, points are the same as earned with the Chase Sapphire Preferred to equally valuable and flexible. This is my choice for small business credit card with no foreign transaction fees.

  • British Airways Visa has the biggest signup bonus of any card with no foreign transaction fees, currently 100,000 points total — 50,000 after first purchase, 25,000 after $10,000 in spend during the first year, and 25,000 more after $20,000 in spend during the first year.

  • United Club card earns 1.5 miles per dollar on all spend, comes with United club membership, also Hyatt Platinum and Avis Presidents Club statuses.

Some other cards that may be useful to some and which waive foreign transaction fees.

For folks who go outside the U.S. rarely, don’t spend a lot when they do, so the points-earning component of the card won’t matter it’s just about some savings on fees, Capital One Venture One is a no fee card with no foreign currency transaction fees.

Some folks will tell you that you need a card with a chip if you’re traveling to Europe. Sure, railway station kiosks perhaps. But for most of my travels I just don’t run into this. You won’t need a chip at a hotel or in restaurants.

There are two types of cards of this sort — chip and signature, these have a chip inside that verifies information for security, you still sign the transaction like any other. The Hyatt and British Airways cards from Chase are both chip and signature cards. This satisfies even most machine transactions.

But this has been all the rage in Europe, and there do exist terminals that will only accept chip and PIN, where you have a secret 4-digit PIN number that you enter rather than a signature. Some folks call desperately for this, I’d argue it’s a bit of a fetish amongst U.S. consumers who want to feel cutting edge or in the know, I’ve never tried to make a purchase yet that was rejected for lack of PIN.

I do have a Diners Club card, which since re-issued by the Bank of Montreal is now chip and PIN. But I really don’t like it. There’s less consumer protection with chip and PIN than with a standard card or one with chip that still requires signature.

That’s because you are responsible for safeguarding your PIN. If a card is used in a chip and PIN transaction and not by you, then a bank can claim that you must not have safeguarded your PIN, you’ll need to make the almost impossible case that you actually have and that your PIN was somehow hacked. It’s almost impossible to rebut this presumption once raised. This has been very commonplace in Europe.

I’ll hold out as long as I can against the notion of chip and PIN. It doesn’t appear to be on the verge of taking hold in the U.S., which I’m glad of. And until it’s truly global then areas tourists or international business folk frequent won’t be insisting on it for the most part, either.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel a topic he has covered since 2002. Co-founder of frequent flyer community Milepoint.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. I’ll agree with you that “in general the best rates are going to be found taking money out of an ATM” as long as you add the rider that it should be an ATM operated by a mainstream bank and not, for example, a privateer ATM set up in a convenience store or airport arrivals area specifically to hit the unwitting with a fee of 3% or even more.

  2. I’ve heard that some of these no fee FC cards do charge a fee in that their exchange rates aren’t as competitive as fee based cards. For example €20 charged to the SPG card will end up as nearly the same USD amount as €20 charges to say the Saph card (in essence you are getting the same rate in the end)

    Have you heard this? Have you tried making the same purchase with multiple cards and seeing what was charged in the end? Just curious

  3. Gary- I was actually just thinking the other day about how it would work using my Starbucks card abroad. So if I have a US card and I am in say Italy, I can take all my left over euros and them to my card, and it will get converted to us currency of no fee to me? At what exchange rate would it be? Something similar to the banks? And can you even use a US starbucks card in other countries?

  4. @Jay: I’ve checked randomly selected Chase credit card exchange rates on foreign transactions (as well as conversion rates used by ATM withdrawals at various banks) against historical exchange rate tables (e.g. at http://www.exchange-rates.org/history/USD/EUR/T ) and found them to be fair. no idea about SPG as I’d never dream of using it outside the USA.

  5. Recently, I used Chase Sapphire Preferred for a large transaction in India. Using the Visa exchange rates for the day(including the 0.8% Visa fee), the charge should have been ~$2100. However Chase charged me ~$2180.

  6. Just out of curiosity, when do you use Diners Club card and how much do you spend on it annually to justify the fee

  7. @caveman I use it for the primary collision damage waiver on rental cars mostly. It does NOT waive foreign currency fees.

  8. @ASen: ouch. That’s approaching the cost of allowing a hotel to do the currency conversion. Did you follow up with Chase?

  9. Starbucks -nice tip to know. I don’t drink coffee but my friends do.
    I usually hold some small amount of excess foreign currency so that I have cash ready for my next trip (even if that trip is 5 years down the road). Sure this may be more costly than just converting back to US $, but it is a hedge and it’s not like our currency has been strong for the past 10 years).
    I too believe in only selecting banks that do not charge ATM fees worldwide.
    Finally (just because), you do realize that your phrase, “…money out of an ATM machine” is redundant, right? Aside from the embarrassingly prolific incorrect use of me/I one other thing that bothers me is when I see people say Automated Teller Machine machine.

  10. Regarding chip and pin cards. Was in France last month and needed gas before turning in my rental early in the morning (7 am). Only gas stations open did not have attendants on duty, and filling machines would only take chip and pin (tried chip & signature, and other cards too).

  11. I just returned from 2 weeks in Ireland – the chip & signature worked fine. A couple of clerks were confused when the signature page started printing, but it never was an issue for us.

    The Dynamic Currency Conversion was an issue – we were very militant about “Euro’s Please” – sometimes even shouting it!

    I had one place that could not figure out how to charge in Euro’s on a USD card. Their machine never gave the option. My sister finally gave in and told me that it was only $3 on the $100 bill and she wasn’t going to fight it.

    I had another place that could not figure out how to refund it in USD and bill in Euro’s. They ended up giving my Mother a discount on her transaction to compensate for the variance.

  12. @jay: I have read at least one post on FT about the no fee cards using a less favorable exchange rate than the others. Seems unlikely, but I planned on testing it out in a couple of weeks on some small purchases in Europe.

  13. We were in The Netherlands and Spain last month and we were unable to use the sapphire card most places we went in The Netherlands, including all the restaurants. We argued often, but they wanted a chip card. On the back end of our trip in Spain we had no issues with the card at all.

  14. Last summer in France I could not use non-chip and pin cards in a sidewalk cafe in Nice, nor in a restaurant in Colmar. I had to leave my wife hostage in the restaurant at 10 pm as I searched for an ATM to pay my restaurant bill with cash. I got tired of hearing “your card is no good”, from people who didn’t understand that American cards don’t have chip/pins.

    Also I could not buy a train ticket from Monaco back to Nice, as there was no attended ticket window, and the machine would not take a non-chip and pin card. It would take Euro coins, but I had only bills, and there was no business in the station to obtain change. We ended up riding the train without a ticket and praying the conductor would not check for them, which due perhaps to the very crowded commute hour conditions, he luckily did not.

  15. Thanks for this post, Gary. We are traveling in Switzerland right now and have been offered to pay in USD and I thought it was just doing the best conversion for me. Went back and checked a couple purchases and they are definitely not giving me the beat rate. I am probably out about $20 on the conversions but I won’t make the mistake again. We are in Europe for another 10 days so that will be a big difference. Have been using the Sapphire preferred without problems so far but have the Hyatt as a backup and for when we stay at the Park Hyatt Zurich on points.

  16. I got interested when I read your comment about BankDirect ATM cards being free of transaction fees at foreign ATMs. But I’m not so certain that you are correct. Do they rebate ATM charges from foreign ATM machines? I copied the following info from the BankDirect website:

    VISA CheckCard: The BankDirect Visa® CheckCard also allows you to access ATMs worldwide. Unlike many banks, we do not charge for ATM usage. However, some ATM owners apply a fee for use of their ATMs. BankDirect refunds up to four (4) ATM transaction fees, at $2.50 per transaction, per statement cycle (from United States locations only). The rebate will automatically appear in your account in the form of a credit.

    ATM: BankDirect puts no limitations on what ATM you choose. Because we don’t own a network of ATMs, we waive the $1.00 fee most banks charge you for not using their machines. So visit any ATM, no matter the location, and as an account holder we will reimburse you the administrative fees for 4 ATM withdrawals per statement cycle (from United States locations only), up to $2.50 per ATM withdrawal.

  17. @Ed – interesting. They don’t appear to have been charging the fee to me on non-US ATM withdrawals but under their rules they certainly could!

  18. Your argument against chip and pin is akin to saying, ‘I never lock my car, because if someone broke into it using a key then my insurance company could argue that I’d lost my key and it was my responsibility.’

    If you lose a chip-and-pin card, aside from online use, it is quite hard to use against you, in countries that support chip and pin. And if you don’t lose it, it’s next to impossible for someone to (say) take note of the numbers and/or duplicate the magnetic strip and mock up a duplicate, and then use it (again, assuming you’re in a country where chip-and-pin is the norm.) A chip-and-signature has some of that protection but not all.

    If you are in a country where nobody is using chip-and-pin, like the US, then it’s pretty clear that if your card is compromised, nobody is going to accuse you of compromising your pin, since nobody is using it in the first place.

    Basically, you’re willing to take a surprisingly high probability of having your credit card compromised, complete with all the hassle and insanity that that entails, along with a small risk that you will still end up liable for whatever the thief charges (it’s not supposed to happen, but it does) in order to avoid a much smaller risk of such theft/compromise, and most likely an absolute-value-smaller risk of being held liable as well.

    Would you trade in an online system with a username and password combo for one where you just put in your username and check a box that says ‘I promise I’m me’, if it resulted in you not being held liable for anything you said on the chat boards?

  19. Add to your list:

    Pentagon Federal Credit Union cards. One them gives 5% cash back on gasoline, and 1/4% cash back on everything else.

    The Fidelity American Express card charges 1% Forex, but rebates 2% on all purchases.

  20. I’ve lived in London for last two years (with all my US credit cards). The only places I’ve experienced that haven’t accepted a “swipe card” (as opposed to a chip/pin card) are the Tube station oyster card top-up machines and the post office. Neither takes Amex even if it is a chip/pin card (like the UK SPG card).

  21. Gary, if you don’t have anything other than a B of A debit card, what do you advice when traveling? I usually bring $600 or so with me, convert it, and then use the euros as much as possible.

    Any suggestions would be welcome.

  22. @Scott Oyster machines take chip/PIN AmEx just fine. I use mine to top up or buy my new travelcards whenever I can’t do it online (generally because I can’t wait the 24 hours it takes to become available). I’ve also had resounding success with swipe cards at Oyster machines when friends have visited. Some require the perfect swipe, but most are just fine.

  23. At least the chip & PIN is a (potentially) universal security feature. One of my pet peeves is U.S. gas pumps that require a zip code for authorization. Those of us who don’t live in the U.S. don’t have a zip code. I can go inside and pre-authorize a specific amount, but I generally don’t want $x of gas; I want to fill up the tank so I can return the car.

  24. @jay- I conducted this very experiment 2 weeks ago in paris. Bought 2 of the same item, paid 1 with chase sapphire, 1 with cap one. Retrieved statement and chase’s conversion cost me more. Replicated this test in london with the same results so I will stick with cap one for large international purchases.

  25. Don’t do the Starbucks trick. I did that in London and ended up with a $450 card that Starbucks would not convert into cash. So I have bought a lot of $3 lattes since then.

  26. I would love to use my Chase credit cards for my upcoming trip to South America. Unfortunately, it doesn’t participate in Verified by Visa or or Mastercard SecureCode, so they are staying home when I go.

  27. I’ve had my non-chipped card refused in London at Nandos, of all places. From what I have heard they have since canceled that policy, but there have been MANY times where I needed to pay for parking or gas at somewhere that is unattended. I don’t like Chip/PIN either, but we need a way to use it with US cards, or else we could end up stranded with no way to get gas/food/etc.

  28. @Mitch- thanks for that- loaded my oyster card up with my Amex SPG chip/pin card today, given your advice. It never used to work last year….

    .. But w.r.t swipe cards- otherwise I never have a problem, though (@joelfreak) I don’t have a car in London, so never got gas or parking so can’t speak for that…

  29. Amex Platinum does charge a foreign currency fee. I confirmed this with Amex prior to my recent trip. Very odd considering the $450 annual fee.

  30. Chip and pin aside, I’ve had trouble multiple times with the Chase Sapphire Preferred card not being accepted because of the lack of raised numbers on the front of the card, which prevents a normal imprint of it. This has happened in South Africa and Southeast Asia. I still love the card, and luckily have the Schwab debit card as a backup so I can usually still avoid the fees.

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