The Real Cost of Using a Credit Card Overseas

The following is a guest post from Fred who is a personal finance writer at Credit Card Finder, where he helps people compare credit cards and choose the best low interest credit cards.

Travelling overseas is an exciting experience, and you want to make sure that the entire trip runs smoothly, with no nasty surprises – from the moment you start packing to the time you have returned to show everyone your holiday snaps, that is why you need to find the best way to use and access your funds overseas.

You may be leaning towards just using your credit card overseas to avoid the hassle of going to get traveller’s cheques and having to show your ID to use them, but depending on the type of credit card you have, you could be coming home with happy snaps, souvenirs and a lot of extra fees on your credit card.

Therefore, here are three different payment scenarios for an overseas traveller with the same expenses, but the costs of using your ordinary credit card, a specialised overseas/international credit card, and the costs of using good old fashioned traveller’s cheques.

Overseas Spending

Your overseas trip can be primarily planned and paid for before you leave, so if you have already booked and paid for your flights, your tours and your accommodation then the expenses of your three week European holiday may include:

· Lunches and dinners. Breakfasts are often included in accommodation packages and some lunches and dinners will be included in your tours. Therefore, if you have to buy lunch and dinner 15 days out of your 21 day European holiday, you will spend $20 on lunch and $50 on dinner each of these days, to total $1,050 in meals.

· Shopping and souvenirs. These are definitely bought on your own dime once you arrive, and since you’re off to Europe, shopping will be a priority. Therefore, you budget another $1,000 for shopping trips and souvenirs for friends and family.

· Miscellaneous food and drink. Getting a bottle of water during your walking tour of Rome, or stopping for a coffee and croissant on a morning you are doing a self-guided tour of France is likely to occur during your holiday and so you may spend another $100 on snacks and drinks during your trip.

· Spontaneous tours and trips. With everything so close in Europe you are likely to encounter tours, ferry rides or flights which are too good to miss out on, so you may spend around $500 on taxis, impromptu tours or flights.

· The total of your overseas spending is $2,650, so what will that cost you on your credit card?

Overseas Spending on a Standard Credit Card

Taking your existing credit card on holiday with you seems easy and hassle free because you don’t need to complete another credit card application and wait for approval before you leave. Plus you know all the PINs and conditions of usage, right?

Features of a standard credit card include:

· A $0 annual fee. That is one of the reasons you chose it as your everyday card because it is affordable to maintain.

· A low 12% purchase interest rate. Again, very affordable to use on an everyday basis.

· A 20% cash advance interest rate. This is a standard cash advance rate, and this is why most of us try and avoid cash advances on our credit cards.

Overseas credit card costs you may not know about:

· A $5 overseas ATM fee. This is an average of the overseas ATM fees charged on most standard credit cards.

· An additional 2.00% interest on cash advances. On top of your already high cash advance rate, many standard credit cards will also charge another 2.00% interest.

· A 2.00% foreign transaction fee. Every time you use your credit card overseas, you will be charged 2.00% of your purchase, on top of your regular interest charges.

· A 2.50% foreign currency conversion fee. This is also on top of the transaction fees, and is a charge for your credit card provider to convert your purchase from the overseas currency.

Therefore, if you were using your standard credit card while travelling overseas, to make $2,650 of purchases, you would be charged and additional $120, assuming none of those purchases were made using cash withdrawn from an ATM of a cash advance.

Overseas Spending on an International Credit Card

There are a number of credit cards available which have services and rewards especially for overseas travellers. If you travel overseas regularly or simply want an inclusive credit card for your trip, you may want to consider a specialised overseas credit card.

Features of an international credit card include:

· An average annual fee of $250. The credit cards which offer more features and better rewards also often charge a higher annual fee.

· Free travel insurance. However, one of those extra features is often free travel insurance and being automatically covered by your international credit card can save you time and money organising your insurance before your trip.

· A high purchase interest rate. International and rewards credit cards also often have a higher standard interest rate, on average around 18%. However, their cash advance rate is still around 20%, much the same as a standard credit card.

· Flat fee for overseas cash advances. Many international credit cards will charge just $5 as a flat fee for overseas cash advances.

· A 3.00% foreign currency conversion fee and zero overseas transaction fees. While the foreign currency conversion is a higher percentage of the purchase, there are usually no other foreign transaction fees charged.

If you were using a specialised international credit card for your purchases while holidaying in Europe, you would be charged an additional $79 in fees. This does not include making those purchases from cash withdrawn from an ATM or a cash advance.

Overseas Spending with Traveller’s Cheques

Traveller’s cheques may seem like an old fashioned type of currency conversion, with electronic payments and international credit cards now available. However, if you are travelling through major towns and tourist areas, traveller’s cheques are still widely accepted.

Traveller’s cheques are like getting a loan from your bank, but you don’t pay any interest or fees and you are charged just 1.00% of the total of the cheques you buy, at the time you buy them so you are not struck with fees while you’re overseas or surprised by a bank statement when you get back. Plus, when you use a traveller’s cheque in a cafe or hotel, you can have ask for your change in cash, so you have a little local currency on you too.

Buying traveller’s cheques in Euros to the value of $2,650 and being charged the average 1.00% traveller’s cheque fee, your overseas spending will only cost you $26 in fees.

Everyone’s journey is different and if you have a preference for a certain payment method, then you should consider the options which make you feel the most comfortable. Travelling and spending overseas is about the experience and if travelling fee free makes you more comfortable then consider traveller’s cheque options and if you want to stick with your credit card payments because they’re what you know, you are now informed of how credit cards charge when you spend overseas.

Do you have any experience using credit cards overseas? Have any suggestions for future travelers?

Make sure to check out Credit Card Finder today!

Photo: no3rdw

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