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TPG Reader Karsten will be studying abroad in the near future and would like to know what credit card would be best to use while she is away:
“I am a current college student at Georgia Tech with 2 years remaining in school. I have 2 questions for you:
1) I will be studying abroad this summer (Mid May – End of July) and I was wondering if you had any suggestions on what credit card I should look into using while abroad?
2) I already have a USAA credit card as they are my bank, do you have any other suggestions on another credit card that would be good for a college student to earn rewards with?”
Great question, and one that more students who are studying abroad should be asking! If you’re going to be spending a significant amount of time out of the country, it’s critical that you get a credit card that doesn’t carry foreign transaction fees.
I’ve written up a list of the top credit cards without foreign transaction fees before, but for those of you who don’t know what they are, forex fees (for short) are 1-3% surcharges that most credit cards charge on all purchases processed outside of the US. A note of caution: if you ever purchase something and the vendor processes the charge outside of the US, you can also expect to get dinged with a fee.
Three percent might not seem like much, but if you’re in Paris charging $3,000 on a week-long trip, that’s an additional $90 just for using your credit card, wiping out the value of any points that would earn. To make sure that doesn’t happen to you, and to verify whether your card does or doesn’t levy these fees, call customer service, or look up the Terms & Conditions documentation on your card.
Also beware that many foreign vendors will ask you whether you want to charge the purchase in the local currency or in US dollars. It seems like a modern convenience to help you track your spending but I recommend choosing the local currency and letting your bank/credit card company process the charge using their foreign exchange rate, which is usually better than the one that you get through the vendor. When you allow the vendor to do it, you can almost be assured they are taking a cut of the action and will not give you the best rate.
For a comprehensive list of the credit cards that don’t charge forex fees, you can check out that post, but generally speaking, many of the Capital One cards don’t, including the popular Capital One Venture and Venture One cards, and the Citi ThankYou Premier, as well as some of my other all-time favorites like the Chase Sapphire Preferred and the Amex Platinum Card (though its $450 annual fee might be out of your student budget!) – and all of those are great rewards cards. The BankAmericard Travel Rewards card is another good potential choice since it earns 1.5 points per dollar spent, carries no annual fee and has no foreign transaction fees.
As for what card might make sense for a college student – hopefully you’ve been doing a good job building your credit with your USAA card, which is a great, solid product for college kids starting out with credit.
Even if you can’t get approved for one of the premium cards out there right now, there are still plenty of options. However, if you’re just starting off with credit and you’ve been paying your bills off on time you might get approved for one of the premium cards because more important than your income is your history of good credit and if you’ve been responsible, you shouldn’t have an issue. TPG readers, including college students who have been able to use their points to travel the world even at a young age.
The best piece of advice I could give you would be to start a relationship with banks now while you’re young, starting with Chase, which has the most lucrative line up of travel credit cards out there that you’ll likely want to apply for throughout the rest of your points-earning life. So for instance, now you could get the no-fee Freedom card from Chase and start racking up those Ultimate Rewards points on it, especially with those quarterly rotating 5x bonus spending categories, and then later on when you get the Sapphire Preferred or the Ink Bold or Ink Plus, you can combine your Ultimate Rewards points and transfer them to hte program’s partners: British Airways, United, Southwest, Korean Air, Hyatt, Marriott, Priority Club, Ritz-Carlton and Amtrak.
The Citi Forward card is another good cash-back card that earns 1 point per dollar on most purchases, but 5 ThankYou Points for every $1 spent at restaurants and on books, movies and music. When you just have the Forward card, you can redeem ThankYou points at a rate of 1 cent each for travel through the ThankYou rewards portal, but then later if you get the ThankYou Premier card, you can redeem them at a rate of 1.33 cents each – already a 33% bonus. The Forward card is geared toward young people building their credit, and offers special perks such as lowering your APR for purchases by up to 2% when you stay under your credit limit, and pay on time 3 billing periods in a row (they will reduce it 0.25% every quarter, a maximum of 8 times). So it’s a good starter card, but don’t use it abroad because it does charge forex fees.
Another option for you in terms of both building your own credit history, earning rewards and using a card that has no foreign transaction fees is to have your parents add you as an additional cardholder on one of their premium cards if they’re willing to do so – just don’t abuse it or you might be coming home earlier than expected!
Have a great time, and let me know what card you end up getting.