Some international transaction fees can be avoided, but all card payments use the MasterCard, Visa and American Express exchange rate
Are you an exchange rate aficionados looking to get the most from your dollar while on holiday?
Be aware of that fact that the figure you hear quoted on the evening news is not the exchange rate you get when you make a purchase or ATM withdrawal. The exchange rates discussed on the evening news are the interbank rates — the exchange rates the banks use to sell foreign currency to each other. These rates are not available to everyday consumers.
For most people like you and me, when we use a Visa, MasterCard or American Express branded product, we’re subject to the Visa, MasterCard or American Express exchange rate. The good news is that this rate is pretty close to the interbank rate. The markup by the card scheme (Visa, MasterCard and Express) is negligible (unless you’re making a huge purchase).
The additional fees applied by the card scheme and the card provider (CBA, NAB, ANZ and Westpac, for instance) are what you need to pay attention to. Currency conversion fees, also called international transaction fees, cash advance fees and international ATM fees should be at the front of your mind if you’re concerned about card fees when you’re travelling.
The following article will have a look at what these fees are, and will point you in the right direction if you’re a looking for a product that costs less to use overseas.
Different ways to pay for transactions overseas
Let’s have a look at the different ways you can pay for goods and items while you’re abroad and the fees and charges that applicable to each type of payment method.
Comparison of No Foreign Currency Exchange Fee Credit Cards.
Rates last updated November 21st, 2014
There are credit cards on the market that do not charge fees for international transactions; however, the majority of cards on the market will charge a fee for currency conversion — this is a fee of 3% when you carry out a transaction in a currency other than Australian dollars. The bank and card scheme will charge a fee to change the funds into a currency the merchant can accept.
Go for a card that waives the foreign currency conversion fee if you want to eliminate this fee from your bank balance.
For example, the 28 Degrees MasterCard is an enticing proposition for people heading overseas, or even spending internationally. Our review of the 28 Degrees MasterCard covers off everything you need to know about the card and using it to shop in a foreign currency.
Prepaid travel money cards.
Rates last updated November 21st, 2014
You can, of course, choose to transfer your money onto a prepaid travel money card. Travel money cards let you hold multiple foreign currencies on the card. The advantage being you can spend on the card without paying for currency conversion — preload Euros and spend in Euros, for instance, and you’ll only pay for the cost of the transaction, nothing more.
Travel card fees.
Although you save on currency conversion, don’t assume that these are fee free accounts. Travel money cards charge when you load funds for the first time, or every time you reload funds. There can also be fees for opening the account, called card issue fees, and when the account is inactive for a period of time.
Keep this in mind:
A consideration for prepaid travel money cards is that you will need several cards if you are visiting several countries. It is expensive to purchase goods or withdraw cash from a country if your travel card in the currency of another country. Comparing prepaid travel money card providers with multiple currencies allows you to load it in the currency of several nations. Once you have purchased the card and loaded it with money it is no longer subjected to any foreign exchange rate fluctuations.
Our comparison of travel cards covers their fees, available currencies and you can read frequently asked questions about these products.
Travel card exchange rates.
If getting the best rate possible on currency exchange is your main concern, you may want to consider a different product. Travel card providers have a different exchange rates for travel cards and credit cards and debit cards.
Travel Money Cards are subject to the same exchange rate for traveller’s cheques and purchases of foreign cash. It’s worth having a look at the provider’s rates prior to carrying out a purchase. Exchange rates are available through the financial institution’s website, and rates are also provided when you’re issued a ‘foreign currency quote’ prior to loading a travel card with funds. You can compare the quote against rates offered by foreign exchange providers, like OzForex, to see if you’re getting the best deal.
What about using cash?
It’s always a good idea to always have some cash on you while you’re travelling. If money talks, cash screams.
ATM withdrawals are virtually inevitable while you’re on holiday, and in most cases, so are ATM fees — but not always.
Eliminate ATM fees.
International ATM fees can be avoided. The local ATM operator fee is a different story. There are Australian accounts, like cards offered by Bankwest, which do not charge for international ATM withdrawals, but the local ATM operator fee still applies. Choosing a credit card or debit card with a major financial institution like Citibank and using a Citibank ATM (Citibank have a global presence) greatly reduces the cost of making an overseas ATM withdrawal, but the less time spent searching for an ATM where you can withdraw for free, the better. Who wants to spend their holiday looking for an ATM to save a couple of bucks?
Another option is to go for a lender with an international ATM alliance. Westpac are partnered with a number of major international financial institutions, Westpac cardholders can avoid ATM fee altogether if they use an ATM within the Westpac global ATM alliance. There are other Australian institutions that have similar arrangements, you can see which banks have international ATM partnerships in the frequently asked questions section of our travel money comparison page.
The exchange rate.
Like when you use your card to make a purchase, when you use your card to withdraw cash, you’re subject to the Visa, MasterCard or American Express foreign exchange rate. You can view these rates on the card scheme’s website.
Get rewarded when you spend?
If you’re about to head overseas and you’re wondering about the choice of plastic to use abroad, think about credit cards that offer rewards, or credit cards that come with travel-centric perks, like complimentary international travel insurance.
Often, credit cards that offer rewards also come with complimentary international travel insurance. This additional perks will be reflected in the product’s annual fee.
In some cases, credit cards offer bonus points when you spend in a foreign currency, and benefits like complimentary international travel insurance is money saved, even before you’ve left the country.