September 23, 2017
Five Ways to Avoid Bank Fees when Traveling Abroad
Traveling internationally can be confusing and expensive for inexperienced travelers. Banks are in the business of facilitating financial transactions and charging fees for their services. It’s pretty crazy that I can swipe a piece of plastic in Hong Kong and my US bank will instantly pay the merchant in Hong Kong Dollars while sending me the bill a month later. Here’s five ways to save money on bank fees when traveling abroad:
Credit Card Fees
Many US credit cards charge foreign transaction fees of up to 3%. That means you’re paying an extra 3% in bank fees every time you swipe outside the US. The solution? Get a credit card that charges no foreign transaction fees. Dozens of travel credit cards offer this perk. I never bring credit cards which charge foreign transaction fees with me when I travel abroad.
Avoid ‘Dynamic Currency Conversion’
When you pay with your credit card abroad, you’ll be given the option to pay in the local currency or in US dollars. If you pay in US dollars, the payment processor will charge a fee to convert the local currency to US dollars before that charge hits your bank. This can add several percent to your bank statement. If you choose to pay in local currency, your bank is the one who converts the local currency to US dollars and they use the actual exchange rate to make the conversion. By cutting out the middle man, you’ll save a fe percent in fees.
No-Fee Debit Card
Most US banks charge an ATM fee for using an ATM outside the country. To avoid this, open a free Schwab High-Yield Checking Account. There’s no minimum deposit required and they don’t charge checking account fees, but most importantly, they don’t charge currency conversion fees or ATM fees, and they rebate all foreign ATM charges! The only catch here is that because Charles Schwab is an investment bank, you have to setup a brokerage account with them in addition to the checking account, and you might get an inquiry on your credit report for opening a brokerage account. But again, it’s all free.
Bring Foreign Currency with You
While it’s great to earn miles and points with credit cards, cash is still king. There’s many countries which still aren’t as credit card friendly as the US. It’s typically a good idea to bring some local currency with you before you arrive at your destination. Any major bank in the US (Bank of America, Chase etc) can get you foreign currency with a few days notice. These banks generally offer the best exchange rates you’ll find. Yes they still charge a commission, but it’s typically much lower than elsewhere.
Airport Exchange Counters
Do NOT exchange currency at airport exchange counters. This is the most expensive way to get foreign currency as they always charge exorbitant conversion fees.
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