From credit cards to ATMS to antiquated travelers checks, there are many options for spending your money abroad.
Travelers need to be wary that many banks and credit card companies do tack on hidden fees.
Peter and assistant travel editor of the Los Angeles Times, Jane Engle share their favorite ways to save when spending abroad.
Peter Greenberg: People ask me how much currency to change before a trip. I say don’t. You’re paying an exorbitant exchange rate for currency in this country. Not to mention commissions. We live in the world of hundreds of thousands of ATM machines. Use them, right?
Jane Engle: Yes. When I go abroad, I certainly rely heavily on ATM machines. Keep in mind I’m not going to the outback; I’m not going to an obscure part of the world. I still do eat the fees and exchange $100 for foreign currency before I go. If I land in the middle of the night somewhere and I’ve got to catch a cab, the driver is not going to take my plastic. You never know what’s going to happen on flights these days. And you can call me insecure or paranoid, but I’m concerned.
PG: No, I get it. Here’s my little secret: Almost every time I travel, especially if it’s a long trip, I will go to the bank and get $200 in $2 bills.
JE: I didn’t know you could even find $2 bills anymore.
PG: You can. It’s legal tender and it’s great for tip money because people remember you. It’s also a conversation piece. U.S. dollars are still widely accepted abroad, including the $2 bill.
JE: Interesting. As long as you’re going to eat these fees exchanging this money, you might as well have some fun with it.
PG: You mention the fees, let’s dig a little deeper. Foreign transaction fees can be pretty substantial––anywhere from 1 percent to 3 percent on purchases. ATM machine fees can be higher. There are a number of banks and financial institutions, from Capitol One to Charles Schwab, that will not charge you a fee if you have an account with them.
JE: Foreign transaction fees have been a very controversial charge from the start. They settled a lawsuit about three years ago against Visa MasterCard Diners Club over failure to adequately disclose these fees. The cards argue that they do actually incur costs with foreign transactions. Their reasoning does not fly with consumers. For years, Capitol One was the only card that didn’t charge fees. Now higher-end gold cards/travel cards have begun to kill this fee. This change is really a result of the consumers complaining.
Learn more: News Analysis: The Great International Credit Card Settlement
PG: I’m a victim of this myself. I’ll go buy something overseas. It could be a restaurant dinner or a service or a good. I never think about that fee until I get that statement. It’s $6 here and $4 there, and $9 here. In total, I spend over $300 in transaction fees that I wasn’t anticipating before I left.
JE: It can be a bit of a surprise on the budget. Call to your credit card company and your bank before you leave and ask them what’s the deal, so that you’re not surprised when you get home.
PG: Recently I went to use a MasterCard in Ireland and they asked for my PIN number. I don’t have a PIN number on my credit card.
JE: Even if you have a PIN, it’s not always accepted abroad. There are also some train ticket machines and kiosks in Europe that uses smart card technology that can’t read our old-fashioned magnetic strip cards.
PG: Not only that, you mentioned that you have a PIN number. Chances are you have a four-digit PIN number. And some European cards have five-digit PIN numbers.
JE: I’ve traveled widely in Europe and haven’t had problems, but people do report problems from time to time. You need to take something as backup because you can’t always rely 100 percent on ATM cards. I am younger than 90 but if I’m going on a trip for a week or so I will take some travelers checks.
PG: I was afraid you were going to go there. I have to put this in perspective, Jane. What is a travelers check if not an unsecured, interest-free loan that you’re giving the bank? It is just a free loan for the bank because they knew you aren’t going to use the travelers checks. In fact there was a time when the first thing the chairman of the board of American Express checked in the morning wasn’t the stock market or how much people were using their card. He wanted to know how much they made on the float with travelers checks.
Learn more: Ancillary Fees, Anti-Trust & Credit Card Hacking In Hotels
JE: You make a good point. You are giving them money. When I get back home if I have any checks left––and I try not to have any life––I take them back to the bank and cash them because they usually don’t charge to exchange them back to cash. A few years ago I tried to use one at my supermarket and the 16-year-old kid behind the cash register looked at me like I landed from Mars. He’d never seen anything like it in his life.
PG: Well, you had one of those Mutual from Mars travelers checks.
JE: I might as well have. In general, I’m not a fan of the prepaid cash cards. I think they just get loaded up with fees.
PG: People market those cards to parents who have kids going over seas by saying you can preload the card with a certain dollar amount and the kid can only to spend a select amount a day. In the long run, I don’t think it really works.
JE: It all depends on if your kid has had trouble using cards in the past. If so, it’s something you might think about.
PG: I’ve got the solution. You give the kid travelers checks. He won’t know how to use them and you’re sure to save a lot.
By Peter Greenberg from Peter Greenberg Worldwide Radio.
News Analysis: The Great International Credit Card Settlement
Ancillary Fees, Anti-Trust & Credit Card Hacking In Hotels
Money, Currency & Credit section
Travel Tip: Credit Card Fees Abroad
Peter Greenberg’s Interview With LA Times’ Jane Engle