How to Avoid Card Fees Abroad

The flights are booked, the hotel room reserved and the case is packed – it’s holiday time! And in this wonderfully modern age we live in, gone are the days where you need to travel with travellers’ cheques or a whole stash of foreign currency.

Today, you can get away by jetting off with just some plastic in your purse. However, these aren’t your ordinary bank debit cards. 9 times out of 10 you will be charged for every transaction you make abroad using your bank debit card, potentially adding a hefty amount to your holiday spending.

Charges can include

  • A non-sterling transaction fee onto the exchange rate, which is typically around 3%.
  • Cash withdrawal fees.

What I’m referring to are specialist debit cards that can be used abroad for card transactions and cash withdrawals.

There is a good selection of credit cards on the market that can be used abroad but the problem with these are that not all offer fee-free cash withdrawals. Whilst you won’t be charged a foreign transaction fee paying for dinner with a credit card, you still may not have the option to withdraw cash freely.

That’s why in my travelling set up, I take both a credit card and debit card that can be used abroad.

Benefits of having a credit card and debit card you can use abroad;

  • It offers a layer of protection if the worst happens and you lose your credit card. Having a specialist card where you can withdraw and still have access to cash is prudent.
  • It’s useful for destinations that aren’t too plastic friendly. Some cities, like Berlin and Amsterdam, are more cash oriented. They accept card payments but paying in cash will probably endear you to the locals more.

One caveat here is that even when taking specialist cards away there is still the potential you will be charged an ATM fee as in some instances a charge levied by the operator of the ATM.

UK Based Card

My UK based setup is the Caxton Prepaid Currency card (as well as the Halifax Clarity as my credit card option). I load the Caxton before I go away with the amount I’ve estimated I’ll spend in cash and just withdraw as I need when I’m on my travels. I also have the option to transfer more money over from my bank if needed via the Caxton app. We’ve used our Caxton card in Europe and America with no problems and I really like the two-pronged approach of having two cards to use just in case something were to happen that compromises one of them.     

US Based Card

Looking ahead to our four months of travel this summer, our thoughts turned to getting our system in place to avoid foreign transaction fees. As we’re paying for our travels from our US accounts, we needed to obtain another card that will let us withdraw cash abroad free of charge. Transferring money back to the UK to load our Caxton card didn’t seem worth it; the exchange rate is favourable for USD → GBP but the Transferwise fee put us off going down this road (sidenote: we absolutely love Transferwise for moving cash back to the UK but in this instance, we thought getting a US based card was the best option to save some money).

And so in stepped Charles Schwab, our no foreign transaction fee saviours! We opened their High Yield Investor Checking Account (don’t be put off by the fact the checking account comes with an investing account – you are under no obligation to invest), which gives you the option to withdraw money abroad as well as pay for transactions abroad with the card. It also does not come with a monthly account fee, which was attractive to us as we won’t have regular money going into the account and will also be drawing down funds in there steadily so at some point will not have the average balance in there some banks require to avoid a facility fee. 

What makes Charles Schwab even more attractive is they refund all ATM fees every month. So even where you are unable to avoid a fee charged by the ATM operator, you will be refunded that charge, making your holiday spending all the more flexible and cheaper!

Some Other Tips for Spending Abroad
  • Always pay in the local currency. For example, if you’re in a restaurant paying for dinner and they ask if you want to pay in pounds or euros, always choose euros. If you pay in pounds, dynamic currency conversion will be performed. This is is where a third party performs the conversion on behalf of the merchant. Whilst some see the advantage of DCC as providing you upfront with the pound amount it’ll cost, the rates of conversion are less favourable than just having the credit card company perform the conversion. Long story short – you pay more when you pay with DCC.
  • Travel with some cash. It’s a good idea to have a small amount of foreign currency on you to help you get through your first day before you get situated at your destination.

It pays to be prepared with a good payment system for travelling to ensure all of your hard earned cash can be spent on enjoying yourself and not on hidden charges and fees.

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