Money matters
(AUgust 2009)

BASIC RULES

When getting ready for a trip overseas, it pays to determine ahead of time how to handle purchases and other expenses that will occur. Generally speaking using ATMs and credit cards results in the best deals. Changing cash or travelers checks is possible, of course, but banks have set, often restricted hours banking. Although their exchange rate is worse than at banks, most hotels provide this service, as do "convenience" exchange shops--- Cambio, Geldwechsel, etc. (Actually, the difference doesn't amount to very much unless you are exchanging a large amount.)

ATM MACHINES

Using your ATM card is convenient and you generally provides a better exchange rate than do cash or travelers checks but note that there can be important variations in the fees levied on foreign purchases and money exchange. It’s easy to lose out by ignoring the fees that American banks and credit card companies can tack on to your overseas purchases.

ATMs are plentiful throughout the world, even in small towns. Of course, the convenience of using an ATM usually carries with it a standard "use fee." Too, overseas travelers could have a surprise in store for them when they discover the bank has added an additional 3% “foreign exchange” fee on top of that! This is a common thing and it will really pay off to find and use a bank that has a competitive foreign exchange fee (or none at all).

Typical A TM Foreign Exchange Fees
(March 2009)
Citibank 3% + $1.50 per transaction for all accounts except for Citigold, Private Bank, International Personal Banking and Global Executive Banking customers which pay 0%;
US Bank 3% + $2 per transaction
Fidelity Investments 0% if linked to a Smart Cash account; 1% otherwise
E-Trade 1%
Bank of America

1% at partner banks; 1% + $5 per
transaction at other banks
Capital One 0% + $1.50 per transaction
Chase 3% + $3 per transaction
American Express 2.7%
Umpqua Bank 0%
HSBC 3% at HSBC ATMs; 3% + $1 per transaction at non-HSBC ATMs
Charles Schwab 0%
PayPal 1% + $1 per transaction
Wells Fargo 0% for PMA Checking; 3% + $5 per transaction for all other accounts

This foreign exchange charge can be called a “standard” fee because it is what Visa International charges on foreign money transactions and the most banks, in turn, charge customers in order to recoup that cost. Note that most banks list the “foreign exchange fee” as a separate item on their monthly statement so it’s easy to see how much they are charging. If a statement doesn’t show this fee as a separate line item it’s probably buried in a reduced exchange rate. Since exchange rates fluctuate it is sometimes it is difficult to confirm the exact amount of the fee.

Moral: Use an ATM card abroad but be sure to pick the right bank and remember there are two fees the bank might charge--- ATM fees and foreign exchange fees. They can add up so do some homework in advance.

Credit Cards

The same general banking practice applies to credit cards--- different issuers can charge different fees! Although using a credit card usually provides the best available exchange rate on the day of purchase, some companies add on as much as a 3% for overseas transactions. Note that fees credit card purchases are usually lumped in with the purchase price, making it more difficult to determine exactly what they are.

 

Sample Foreign Exchange Fees
Chase VISA 3%
Citibank VISA 3%
Capital One
(Capital One not only doesn't impose its own fee, but
it also eats the 1% fee that Visa andr MasterCard impose.)
0%
American Express 2.7%
Bank of America VISA/MC 3%
E*Trade VISA 1%
HSBC VISA 3%
US Bank 3%
Wells Fargo VISA 3%

Notice that purchases made on the same day with a Chase United Airlines Visa and a Capital One Visa will show a 3% difference!

Look out for a little trick that can pop up when making overseas credit card purchases. Some sellers--- department stores and even private hospitals, for example--- may offer to charge buyers in US dollars rather than the local currency. This sounds good but they usually give a lower exchange rate than VISA or MasterCard will when the transaction reaches their offices. Just say "No Thanks" and be sure the purchase is charged in the local currency.

Buying Foreign Currency

It is important to know that there are usually two exchange rates. The so-called “offshore rate” is what you will get if you purchase foreign money outside of the country issuing it. (For example, buying Euros in Chicago or Mexican pesos in Seattle.) This rate is often as much as 10% lower than the “onshore rate,” the price of making the same transaction in London or Cancun. So, as a rule, it is generally a smart practice to delay exchanging money until arriving at the final destination. There are exchange kiosks and ATMs all over most international airports, railroad stations, and cruise terminals, so there is usually no difficulty changing money on arrival.

(Frequent travelers may find it a good idea to hang onto some foreign currency for the "next trip," thus avoiding the need to make an immediate exchange at an airport in order to have enough cash for a taxi ride!)