This is a guest post from Odysseas Papadimitriou, CEO of Card Hub, a leading online marketplace for the best credit card deals.
We’ve all heard the expression “a penny saved is a penny earned,” and while somewhat trite, it also makes sense and is a good reminder of the importance of both frugality and comparative shopping. It also applies, interestingly enough, to overseas travel. While traveling abroad can be quite expensive and your trip might be for pleasure rather than business, there’s no reason why you can’t be “earning” the whole time you’re gone. This doesn’t mean you have to be so tight on your vacation that you can’t travel around and see the various Lord of the Rings sites while staying in Wellington, NZ, or can’t go to the top of the Skytree tower while visiting Tokyo, JP. There are myriad opportunities for saving that accompany foreign travel, so instead of paying more than is truly necessary, what say we turn your next trip out of the country into an opportunity to save/earn a whole lot more than a penny?
The single most important factor in saving money while traveling abroad is the exchange rate. Banks, credit card issuers and currency conversion companies tend to offer different exchange rates, and finding the lowest one means getting more bang for your buck. After all, whether you use cash, plastic or travelers checks, all of the money you spend while abroad must at some point be converted from the U.S. dollars that currently reside in your bank account to the currency used in your destination country. In other words, your exchange rate impacts every dollar you spend and will result in unnecessary costs.
How to get the best exchange rate
- Think Visa or MasterCard: In addition to being the most widely accepted card networks in the world, Visa and MasterCard offer some of the best exchange rates possible, according to Card Hub’s currency conversion study. More specifically, Visa and MasterCard offer exchange rates that are 7.9% lower than what you’d get when exchanging cash at a major-bank before leaving and 14.7% lower than Travelex’s cash conversion services.
- Open a no foreign fee credit card: Whether you opt for a Visa or a MasterCard, make sure it’s a no foreign transaction fee credit card. According to Card Hub data, 90.2% of credit cards charge 3% foreign usage fees. Do so before booking flights and hotels, as exchange rates and foreign transaction fees typically apply to any purchase processed outside the United States, whether you are physically out of the country or not.
- Get a low-foreign-fee debit card: Cash is still an important part of traveling abroad, given that some merchants and automated machines (e.g. vending machines and train station kiosks) don’t accept credit. You should therefore get a debit card that both allows you to take advantage of the low Visa or MasterCard exchange rate and doesn’t gouge you with international usage fees.
- Shop local banks (if applicable): If you can’t find the right debit card, price cash conversion options at various local banks before departing. A nearly 12% differential exists between the best and worst exchange rates offered by the 15 major consumer banks that were polled in the aforementioned Card Hub study. Make sure to ask about any fees or currency conversion deals at each bank you call.
- Decline merchant offers to convert prices to U.S. dollars: Sure, it sounds helpful, but merchants really convert purchase totals to U.S. dollars in order to apply a very unfavorable exchange rate and bag a profit. It’s called dynamic currency conversion and it can be avoided by making sure to only sign checks expressed in the currency native to the country in which you’re traveling.
One Last Tip
You’re now all set to save up to 15% on your trip abroad…well, almost. Just make sure to call your card issuer(s) before leaving and notify them of your travel plans. Not only will this keep your credit and debit cards from getting suspended, but it will also give you a chance to ask for a toll-free international contact number that you can call if necessary as well as any information about travel insurance or card use overseas that you may be curious about. Now, it’s truly time get your trip underway