How to Avoid International Banking Fees When Traveling Abroad
A friend asked which credit and debit cards we use when traveling internationally. Her college-age daughter was about to leave for a study abroad program in Italy. First, plan ahead. Second, your goal is to eliminate fees. Third, call your bank and let them know where you are traveling or set it up online. These fees can add up, so a little international travel financial planning goes a long way!
FITZ BITS TIPS: Another money-saving tip — always choose the local currency when paying with a credit card.
Your goal is to eliminate fees.
These are my honest opinions and recommendations — I do not receive any compensation or discounts during our travel. This story does include some affiliate links for which I may receive a small commission at no extra cost to you. Please click the links to support my blog.
DEBIT CARD: What to look for in making your selection
Reimbursement of ATM fees
Everyone is familiar with getting a charge when the ATM is not your own bank. This can be in your own town, state, country, or around the world. So, whether traveling near or far, it is prudent for travelers to find a way to avoid these fees. We used to find banks in other countries that were affiliated with our home bank. For example, Scotia Bank is affiliated with Bank of America. Hence, you will not get charged for using their ATMs. Take it one step further and find a checking account that reimburses you the charges for using other bank-owned ATMS.
Zero foreign currency transaction fees
People are less familiar with foreign currency transaction fees. These are the fees a bank charges when you go to an ATM in another country and withdraw cash in their currency, for example Euros. They will often charge a foreign currency fee of 2% or higher when they convert that Euro to a US Dollar debit in your account.
Recommendation: Schwab checking account
I like to use a Schwab checking account because fees incurred using another bank’s ATMs are reimbursed and there is no foreign currency transaction fee. Additionally there is no minimum balance and it can connect to other bank accounts to facilitate money transfers in and out. This is an unbelievable value for international travel. When I use my Schwab debit card at a different bank’s ATM, they reimburse me on the following month’s statement. It doesn’t matter if it is in this country or a foreign bank anywhere in the world. Be aware, there is a monthly limit on the number of uses.
CREDIT CARD: What to look for in making your selection
Credit cards are really important for international travel. Depending upon where you travel, some vendors no longer accept cash. We have found this particularly true in Europe.
Find a credit card that does not charge international currency transaction fees. Some cards offer this perk for a year after opening a card, so please double check any your current cards as well. If you do not have a credit card without the fee, apply for a new one. There are countless options, many with attractive rewards and no annual fee.
Always opt for the local currency
In international travel, restaurants, hotels, stores and other vendors may offer the choice to pay in the local currency or in dollars. Always opt for the local currency if your credit card does not have the foreign transaction fee. If you opt to pay in dollars, your conversion rate from the local currency to the US dollar will be in the vendor’s favor and cost you more.
Recommendation: Capital One credit card
Capital One cards do not charge the fee, so their suite of credit cards is a good starter point. If you want more specific guidance, here is what our college son did. He applied for the Capital One Savor card. He probably will not have enough charges/rewards to justify an annual fee so he picked a version of the card that earns him 3% cash back on dining, entertainment, streaming service and groceries. These are probably the biggest spend categories for him outside of housing and education which typically are not charged. He pays no annual fee on the card and has no foreign transaction fee. He even earned a $200 cash bonus after his first $500 charged.
Sometimes "Cash is King"
Credit card payment is widely accepted throughout Europe. My son studied abroad in Barcelona and traveled all around Europe, using a credit card for 99% of his payments. As already mentioned, it did not have international transaction fees and he pushed the button to pay in the local currency. However, there are still many places where you will get discounts to pay in cash, they only accept cash, there is a limit on ATM withdrawals, or there is no ATM on the island! It helps to do a little research and be prepared.
Other places you will likely need cash is tips for excursions, local busses, and markets.
