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As you start arranging travel for this spring and summer, don’t overlook your plan for withdrawing cash abroad. As TPG Senior Points & Miles Contributor Jason Steele explains, if you don’t prepare for the situation by bringing a debit card that waives fees, you can get slammed with some huge charges.
No matter how much you plan ahead, you’ll often need to withdraw money in the local currency when you’re overseas. While cash has always been king in developing countries, on my last trip to Japan I was surprised to find that credit cards were not accepted at nearly as many places as they are in the US. You never know when the need for cash will come up, so it pays to be prepared by having a debit card that won’t charge exorbitant fees.
In today’s post, I want to show you seven ways to save on ATM withdrawals during overseas trips.
1. Don’t Use a Credit Card
There are plenty of reasons to hold and use travel rewards cards, but they shouldn’t be your go-to when it comes to withdrawing cash at the ATM. Even if you use a card with no foreign transaction fees, the withdrawal will likely entail a large cash advance fee. For example, my beloved Starwood Preferred Guest® Credit Card from American Express charges a cash advance fee of 3% or $5 (whichever is greater), while the otherwise-great Chase Sapphire Preferred Card charges a whopping 5% or $10, which equates to a 50% surcharge on a $20 withdrawal!
But it gets worse: There’s no grace period on cash advances, so you’ll be incurring interest charges from the day of the withdrawal, usually at a rate that’s even higher than the purchase rate. For instance, the cash withdrawal interest rate is 25.49% for the Starwood Card and 25.24% for the Sapphire Preferred. It’s probably not worth even selecting a PIN for your credit cards, since you should never plan to use them at an ATM.
2. Understand How Debit Card ATM Fees Work
There are three ways you could be hit with fees when using your debit card overseas. First, your bank could charge you a fee for using an out-of-network ATM. Second, the bank that owns the ATM could tack on additional fees. Finally, you can be charged foreign transaction fees, just as with a credit card. Make sure you assess whether a given ATM will incur these fees before you withdraw money.
3. Look for a Debit Card That Has No Out-of-Network Fees
There’s nothing worse than being charged twice to use your ATM card at an out-of-network machine (once by your bank and once by the owner of the ATM).
To avoid this, open an account that doesn’t impose out-of-network fees. For example, Capital One’s 360 Checking has no out-of-network fees, though you may be subject to fees from the ATM owner.
4. Use a Debit Card That’s Part of a Large Network
One way to avoid the fees from out-of-network transactions is to use a debit card that’s part of a large, international network. For example, the Allpoint network includes 55,000 ATMs in the US, Canada, the UK, Puerto Rico, Australia and Mexico. In addition, Bank of America is part of the Global ATM Alliance, which has international partner ATMs in the UK, Italy, France, China, Germany, Mexico, Canada, Peru, Chile, Ukraine, Australia, New Zealand and the Caribbean. That said, Bank of America does add a 3% foreign transaction fee when you withdraw money abroad.
5. Look for a Bank Account That Reimburses You for ATM Fees
Several banks offer reimbursements for ATM fees charged by other banks. Some cap these fees, often at $10 per month, while Charles Schwab offers unlimited ATM reimbursements worldwide.
6. Watch Out for Foreign Transaction Fees
When you’re taking out smaller amounts of money, a 3% foreign transaction fee is far preferable to a $3 ATM fee. Yet if you need to withdraw hundreds of dollars outside of the US, you should look for a debit card with no foreign transaction fees. This includes debit cards from Capital One, Charles Schwab and Discover. To see other options with low foreign transaction fees, read TPG’s post, The Top 11 Checking Accounts for Avoiding Foreign ATM Fees.
7. Avoid Changing Money at the Airport
If there’s one place where you’re guaranteed to get the worst deal, it’s at the arrivals area of an international airport. Here, you’ll always find the largest ATM fees, the least favorable exchange rates and the highest likelihood of being shortchanged. Avoid exchanging money at international train stations and ferry ports as well.
Other Tips for Saving Money on Currency Conversion
- Never underestimate the power of the US dollar — While it’s important to have local currency, you may be able to receive a better effective exchange rate when using American dollars. I’m often surprised by how much demand there is for US currency in foreign countries, and I’ve had great success when offering to pay in dollars, especially at smaller stores and with merchants in a large bazaar. On the other hand, hotel operators and other large companies often impose their own exchange rates, which can be very unfavorable.
- Be extremely careful to pay in the local currency — Dynamic Currency Conversion, or DCC, is a popular scam with merchants and credit card processors. Supposedly, this “service” offers you the opportunity to pay in your local currency, but it really just adds a huge commission. In theory, you’re supposed to be asked to agree to this “service,” but between language barriers and the merchant’s incentive to earn a commission, many travelers are simply duped into these inflated charges. This happened to me when Hertz in Italy fraudulently added a 4.5% commission to my bill, but I successfully received a refund when I contacted its executive customer service. For more information about this issue, read TPG Senior Points & Miles Correspondent Nick Ewen’s post, Dynamic Currency Conversion and Why You Should Avoid It.
- Always contact your bank before you go — The only thing worse than paying extra fees for an ATM transaction is having your withdrawal declined in the first place. Yet this is what can happen if you travel overseas without notifying your bank in advance and it suspects fraud. Before you leave, call your bank and provide a list of the countries you plan on visiting, even if you just have a layover.
There’s a time and a place to earn valuable points or miles by using a travel rewards credit card, but unfortunately, withdrawing money abroad is not one of them. By understanding the different ATM surcharges you could face and choosing the best debit cards to help you avoid them, you can access cash in other countries at little to no cost.
What’s your favorite debit card for avoiding ATM withdrawal fees abroad?
- Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $625 toward travel when you redeem through Chase Ultimate Rewards®
- Chase Sapphire Preferred® named a 'Best Travel Credit Card' by MONEY® Magazine, 2016-2017
- 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
- No foreign transaction fees
- 1:1 point transfer to leading airline and hotel loyalty programs
- Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 50,000 points are worth $625 toward travel
- No blackout dates or travel restrictions - as long as there's a seat on the flight, you can book it through Chase Ultimate Rewards