No Foreign Transaction Fee Credit Cards

By: Odysseas Papadimitriou, WalletHub CEO According to WalletHub’s Currency Exchange Study, a credit card provides the cheapest form of currency conversion. As long as you’re using a credit card with no foreign exchange fees that is on the Visa or MasterCard network, you’ll save up to 6.41% and 10.84% on currency conversion relative to cash services offered at local banks and airports, respectively. Besides being cheapest, credit cards also provide the simplest means of currency conversion, given that it’s done automatically upon a purchase being made.

Please keep in mind that 90% of all credit cards have an average foreign transaction fee of 2.08%, according to WalletHub's data. That’s what makes planning ahead and getting one of the credit cards with no foreign transaction fee so important. Capital One used to be the only real player in this niche credit card category, but a number of other major issuers--including American Express, Chase, Citi and HSBC -- have since started offering credit cards without foreign transaction fees.

By: Odysseas Papadimitriou, WalletHub CEO No special type of credit card is needed to make international transactions, though a no international fee credit card is necessary to avoid the 3% fee, that the vast majority of credit cards charge on any purchase processed outside the U.S. Whether a credit card will work in a given country solely depends on which of the four credit card networks it belongs to (i.e. Visa, MasterCard, American Express and Discover). Visa and MasterCard are accepted practically anywhere a credit card can be used worldwide. American Express’ reach is far less but still significant while Discover can only be used in about a quarter of the countries and territories that accept Visa and MasterCard outside the U.S.

European countries are increasingly moving away from the magnetic stripe credit cards used in the U.S. in favor of chip-and-pin technology. As a result, while you will be able to use your U.S.-issued credit card 95% of the time, you may be unable to use your card at some vending machines and automated kiosks in airports and train stations. Depending on the country, you might also need to show your passport for proof of identity when using a credit card or debit card.

By: Odysseas Papadimitriou, WalletHub CEO Chip-and-pin credit cards are becoming the standard in Europe, Canada and Japan. The main difference between them and the magnetic stripe cards we use in the U.S. is the fact that chip-and-pin cards provide better fraud protection by adhering to global EMV standards. This heightened protection is due to the fact that a consumer has to input a Personal Identification Number (PIN) that must match data stored on a secure microchip embedded within the card for a transaction to be authorized. Some U.S. credit card companies are beginning to offer chip-and-pin cards as well as chip-and-signature cards and chip-based contactless payment methods. Therefore, global credit card interoperability appears only a matter of time. In the meantime, regular credit cards with no foreign transaction fees will be sufficient for all purchases made abroad.

"Currently American cards do work in most places," says Eldad Boker, a professor with Johnson & Wales University’s Center for International Tourism. "Europe and Asia are moving rapidly toward a chip based card, which in the next few years will become a challenge for American tourists traveling without the chip based cards. Many automated kiosks in Europe already do not accept cards that are not equipped with the chip based technology. (Ex: Train and bus transportation system, some banks and others). With the spread of this technology to other parts of the world, the American tourist will need to request chip based card, from the issuing banks. A tourist without this type of a card will face many more challenges than a tourist that carries a chip- based card."

Indeed, transactions made at unattended automated kiosks, such as those in train stations, may necessitate a chip-and-PIN card, as not even chip-and-signature cards will work given their lack of a PIN for identity verification. But very few U.S. banks offer chip-and-PIN cards, and you can get around the unattended kiosk issue by simply taking a debit card with low international withdrawal fees along with you.

So, the standard magnetic stripe credit card will do the trick for now. That might change in a few years, but don’t worry, when chip cards become a true necessity it will be a big deal and you’ll hear about it.

By: Odysseas Papadimitriou, WalletHub CEO There are a number of things you must do before using a credit card abroad, including:

1. Get a no foreign transaction fee credit card before booking flights, hotels, etc. associated with an international trip. Do so as soon as possible because foreign transaction fees will be assessed for any purchase processed through a foreign merchant, even those you make before departing.
2. Call your credit card company in order to notify them of your international travel plans and ask for a toll-free number to call in case you encounter problems. If you don’t tell your card issuer that you’re going to a particular country, your card will not work there.
3. Keep your account number and credit card company’s phone number somewhere safe, because if your card gets lost or stolen, you’ll need both in order to get a new card sent to you.
4. Some countries may require identification in order to authorize a U.S. credit card transaction so don’t forget your passport when you go shopping.
5. At the checkout counter, decline any merchant’s offer to convert prices into U.S. Dollars, so you don’t fall victim to Dynamic Currency Conversion (DCC). "Some tourists are happy to know the amount they will be charged in US Dollars. The reality of 'knowing' the exact amount they are charged in US currency, is considered by some, to be ‘a value added’ service,” Professor Boker said. "Other customers react to the DCC phenomena in disapproving manner. When they realized that at Point of Sale (POS) the charge on their purchases is higher than what the credit card company would have charged, they are disapproving of the practice. Many react to this ‘revelation’ by suggesting that it was a ‘one-time thing,’ and from next trip on, they charge purchases in the local currency."

By: Odysseas Papadimitriou, WalletHub CEO Whenever you travel abroad, it’s a good idea to have cash. While the level of importance obviously depends on how developed the country you’re visiting is (the more developed, the more merchants that accept international credit cards), it’s inevitable that you will find yourself needing to make at least a few cash-only purchases (e.g. cab fare). So what’s the best way to go about getting it? Well, for starters, do not even consider using a credit card for a cash advance, as this will be very expensive, in light of the cash advance fee and APR. Your best options are a debit card or an ATM card. As these cards also come with foreign transaction fees, it pays to shop around before opening one.