Using Credit Cards Overseas

by Nancy Bestor

We’ve talked before about the best (and cheapest) ways to handle money abroad, but as things are always changing, it doesn’t hurt to revisit the topic every now and again. We never take traveler’s checks and rarely do we acquire foreign currency before leaving the U.S. Our trip this past summer to France and Switzerland was no exception.

We took our ATM card and two credit cards, and made sure that each organization noted in our accounts that we would be traveling abroad. As soon as we arrived in Switzerland, we went to an ATM machine in the Zurich train station and withdrew Swiss francs. Then, as soon as we crossed the border to France, we did the same to get euros. ATM machines do of course charge a per transaction fee, and sometimes a percentage fee as well, so we try and get as much cash out of one ATM transaction as we are allowed (usually between $300-500 per day).

Hands down, the cheapest way to make purchases when abroad is with a Capitol One Visa Card, which does not charge a foreign transaction fee. Let me repeat, Capitol One Visa DOES NOT CHARGE A FOREIGN TRANSACTION FEE! To my knowledge, they are the only credit card that does not charge this fee. Most credit cards charge anywhere from 2-3% per transaction. Obviously not every restaurant, hotel or store takes credit cards, so we always have a backup plan, but using this card has saved us several hundred dollars in fees over the years.

But we have run into a few problems using this card in other countries. The reason? US bank issued credit cards use magnetic stripe technology, while credit cards in Europe use the “smart card” or chip and PIN technology. European credit card terminals can still accept magnetic stripe cards, but they must be processed in a different way, and many European businesses and their employees do not know how to process them.

When we ran into this problem, we asked the business to run the card again, and in most cases they were able to figure out how to accept our card. US Banks are beginning to catch up to banks in Europe, but chip and PIN credit cards are still in the trial phase, issued by some banks to frequent international travelers as part of a pilot program. The best advice I can give to customers is to have an alternative method of payment available as a backup, whether it is another credit card, cash, or even a quick dash to a nearby ATM machine. For more information on this issue read this story in the New York Times. (And here's another story on the subject from www.creditcards.com

Taking two credit cards and one ATM card ensures that we always have a back up. The few times our primary credit card has not worked, we’ve always been able to use our secondary credit card or find a nearby ATM for cash.

A recent article in the New York Times offers more information on this topic.