When you've carefully budgeted for a trip abroad, you don't want to pay extra for using your credit card to make purchases there. But if you're not careful, you may find out that your credit card company is tacking on an extra fee every time you use your card outside the U.S.
Foreign transaction fees can run between two to three percent of your purchase amount, depending on your credit card agreement. That means if you've budgeted $4,000 for your trip abroad -- hotels, airline, food, sightseeing, gifts, etc. -- you could end up paying an additional $120 in fees. (That's enough to buy a nice souvenir or have a good restaurant meal.)
Some credit card companies are even charging for foreign purchase you make while physically based in the U.S. If you see an item from an overseas seller on an auction website, or make a purchase directly from a foreign company, you may be hit with the foreign transaction fee. There have also been some reports of travelers booking airline tickets on a foreign airline through a site like Expedia and having to pay the foreign transaction fee on that purchase. If you're planning such a purchase, check with your card company and/or read your credit card agreement to see if such charges will apply.
Fortunately, some credit card issuers -- notably Capital One and Discover -- have eliminated international transaction fees on all of their cards. Other companies, like Citi, Chase and American Express, have eliminated the fee for certain cards. So if foreign travel is in your vacation plans this year, check your card agreement carefully or call the customer service number to verify whether or not you'll be charged a foreign transaction fee. If your current card does, you may want to apply for a card that doesn't charge that fee.
Before you take a trip abroad, it's always a good idea to notify your credit card issuer to let them know. Capital One recommends that you be prepared to provide:
Make the call a week or so ahead of time, since it takes two business days for this information to be updated in the company's records.
Here are a few more suggestions:
Having a credit card when you're traveling abroad is a real convenience, but there's no reason to pay more than you have to for the privilege. A little upfront homework may result in some significant savings for your trip abroad.