How to avoid currency exchange fees

How To: Avoid Currency Exchange Fees

Travelers abroad often neglect to factor what could be a significant expense into their budget: currency exchange fees.

Major credit cards like Mastercard and Visa (still the two most commonly accepted worldwide) often hit users with currency exchange fees up to 4% of the purchase. If you spend only $1,000 overseas using your credit card, you’d pay an additional $40. (And if the exchange rate for the country you’re visiting is not in your favor, your money won’t go as far.)

Fortunately, there are a few ways to minimize – or avoid altogether — currency exchange fees.

1. Use a Capital One Card.

Both Mastercard and Visa charge a 1% foreign currency exchange fee when the card is used overseas. But, on top of that, some banks assess additional fees of 2 – 3 %. Currently, according to our research, Capital One is the only credit card issuer that does not assess additional fees.

Going back to our hypothetical $1,000 in purchases, the exchange fees will only cost you $10 – a $30 savings. If you have a CapitalOne Quicksilver card, which offers 1.5 % cash back on all purchases, you’ll get a little bit more than the 1 % currency exchange fee back as a cash reward.

End result: No currency exchanges fees!

2. Use an American Express Card.

American Express cards charge a 2 % currency exchange fee; still half the amount of most Visa and Mastercard credit cards. However, American Express is not as widely accepted overseas as Visa or Mastercard.

If you don’t have a Capital One card, though, and don’t want to (or can’t) apply for new credit before your trip, use an American Express card when you can, and keep a Mastercard or Visa onhand for places that don’t accept Amex. Again, you can offset all or part of these costs with cash back rewards.

3. Use traveler’s checks.

Avoid currency exchange fees by purchasing a number of traveler’s checks from your bank before you leave. Purchase large and small checks, as some places won’t accept larger bills.

Treat traveler’s checks as cash, and keep multiple copies of your receipts. (Keep a copy of your receipts with you, a copy in your hotel room safe, and a copy at home with someone you trust.)

4. Avoid currency exchange fees by using cash.

It’s not a good idea to travel exclusively with cash, but you’ll want to keep some cash on hand in a variety of denominations. Before you leave for your trip, call around for the best currency exchange rates.

You’ll find the worst currency exchange rates at airports, hotels and tourist change bureaus.

If you come home with extra foreign currency, you may want to keep an eye on currency exchange rates for a few days or weeks in order to get the best exchange rate. (You may turn a small profit; but at the very least, you want to avoid losing money.

American Express offers an easy currency exchange calculator, which will give you a good idea of the going rate. Banks typically offer the best currency exchange rates.

What You Should Know About Currency Exchange Rates

In addition to different currency exchange fees, credit cards have varying currency exchange rates. Capital One often has less favorable currency exchange rates, but you’ll still come out ahead with a 1 % exchange fee.

If you have a few different cards to choose from, contact your credit card issuer to find out the currency exchange fees and the currency exchange rate, and then do the math to find the best deal. The information may be on the website, but it’s usually buried and difficult to find. It’s better to call customer service and make sure you’re getting the most up-to-date information.

If you foresee having to use an ATM card while you’re abroad, call the banks in advance to verify ATM locations, exchange rates and exchange fees. It’s best to plan ahead and bring all the money you’ll need, in the form of cash, traveler’s checks, or widely-accepted credit cards.

Thinking of using a Discover card? It’s not typically accepted at all overseas.

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