• Chris Cyndecki CFA, CFP®

Money Tips: International Edition



Summertime is in full-swing, and you’ve spent months thinking about your upcoming international trip. Did you remember to pack your no-foreign-transaction-fee credit card? ...My what?

Most people don’t feel comfortable carrying a large

amount of cash while walking down the streets of a foreign country. Also shopping around for the best currency exchange rate takes time away from vacation fun. Even small vendors are now taking credit card payments via their smartphones. Carrying a credit card can provide peace of mind and convenience while traveling.

We want to make sure you avoid some costly money mistakes during your next international trip.

Foreign Transaction Fees

When making purchases internationally, many credit card companies will charge a foreign transaction fee, typically 3% of your total purchase amount (1% to the payment processor and 2% to the card issuer). These fees can quickly add up when buying excursions, gifts, food, tickets, etc. Avoid these unnecessary fees by using a no-foreign-transaction-fee credit card.

Dynamic Currency Conversion (DCC)

This one is sneaky. The vendor may ask you if you want to pay in your home-country currency or in the local currency. If I live in the United States and want to buy a painting from a street vendor in Barcelona, it makes logical sense for me to pay in US Dollars instead of Euros. Here is the problem: the exchange rate quoted by the vendor is often terrible, which can result in me overpaying for my painting by 4% or more.

Here is a quick hypothetical example: Let’s assume the listed price of the painting is 50 EUR.

Option 1: I pay in home-country currency (USD)

The vendor provides a “service” by converting the price of the painting to USD and telling me exactly how much my credit card will be charged in USD. He quotes me a price 60.50 USD, reflecting an exchange rate of 1.21 USD per 1 EUR.

Option 2: I pay in local currency (EUR)

The vendor charges my credit card 50 EUR. My credit card company converts the purchase using an exchange rate of 1.15 USD per 1 EUR. The amount reflected in my credit card statement will be 57.50 USD.

Due to the lousy exchange rate offered by the vendor, I would pay an extra $3 for my painting by paying in home-country currency. This equates to an additional 5.2% compared to paying in local currency. Always be sure to make credit card purchases abroad in local currency to avoid the dynamic currency conversion fees.

Travel Card Benefits

Many travel credit cards include a variety of additional benefits such as: lost luggage protection, travel delay protection, car rental insurance, travel accident insurance, preferred boarding, and free baggage checking. Be sure to read the entire benefits pamphlet associated with your travel credit card to learn the specifics.

Other Travel Tips

Always make physical and digital copies of important documentation including: passports, health insurance cards, and travel itineraries. Store these documents digitally in a secure cloud-based platform that can be accessed easily from a third-party computer. Also be sure to notify your credit card company that you will be using your credit card abroad.

Safe travels!