Currency conversion fees hit ATM
and debit cards
The handy ATM/debit
card you've packed for your big overseas vacation may be packed
Many banks charge fees whenever a customer uses
an ATM/debit card outside the United States.
Debit cards, such as the Visa Check Card and
MasterCard Money, are linked to a cardholder's checking account
and can be used for purchases and to withdraw money from overseas
Foreign-fee double whammy
Most banks zap customers with $1.50 to $5 fees for using overseas
ATMs. And now some major banks are charging customers 2-percent
fees for each debit card purchase made while traveling abroad.
These new fees come on top of 1-percent fees
long charged by Visa and MasterCard for transactions involving foreign
"If your bank is adding 2 percent it's
simply because they see it as a way of getting extra money out of
you," says Ed Perkins, a nationally syndicated travel columnist
and consumer advocate.
"By the time your bank gets the charge
it's already in dollars."
When you make a purchase with a credit card
or debit card, you pay an overseas merchant in local currency. But
the charge that shows up on your credit card bill or bank statement
is in U.S. dollars.
Let's say you take your debit card to Switzerland.
When you hand your card to a waiter in Zurich, you're paying for
your meal in Swiss francs. Your bank statement will list the cost
of your dinner in U.S. dollars.
Visa or MasterCard converts the cost of your
meal from Swiss francs to U.S. dollars and charges your bank a 1-percent
currency-exchange fee for the service. Many banks pass this 1-percent
fee on to customers.
Some major banks are tacking on new fees of
their own. Bank of America, Bank One and Wells Fargo are among the
banks that charge customers 2-percent fees for each debit card and
credit card purchase made overseas.
"There's no cost to the bank," Perkins
says. "At that level, it's a pure gouge."
Let's say your bank charges the 1-percent Visa
or MasterCard fee for foreign transactions plus a 2-percent surcharge
of its own.
And let's say you use your Visa Check Card to
buy a $200 pair of shoes in Milan. You'd end up paying $2 to Visa
and $4 to your bank for a grand total of $206.
How can you tell if your bank is getting a cut
of every purchase you make overseas? Check your customer agreement.
If you can't find that, try calling your bank or credit card company.
Still a good deal
Despite these new fees, debit and credit cards are still a great
way to pay while traveling.
The exchange rates secured by Visa and MasterCard
for debit card and credit card customers are based on wholesale
rates offered to large banks and corporations rather than the retail
rate offered to consumers. So you're guaranteed an excellent exchange
rate each time you pay with plastic overseas.
Many travelers also use debit cards to withdraw
cash at overseas ATMs. It's easier and cheaper than exchanging U.S.
dollars at an overseas bank or exchange counter.
"It's a cleaner process. You know you're
going to get the best rate and you know you're not going to have
any troubles," says Joel Widzer, author of The Penny Pincher's
Passport to Luxury Travel. "You get your best deal at an ATM
in that country."
And while Visa and MasterCard charges a 1-percent
fee for its service, a bank or exchange counter is likely to charge
fees of 5 to 8 percent.
So you'll get a better exchange rate and pay
less in fees when you withdraw $100 worth of francs from an ATM
outside a bank in Paris. Step inside the bank and exchange $100
in cash for French francs and you'll end up paying a higher exchange
rate and higher fees.
Another great thing about ATMs is you can find
them just about everywhere, especially in Europe.
"ATMs are all over the place including
major airports," Perkins says. "I haven't seen a European
airport that doesn't have ATMs around."
The Web sites of Visa and MasterCard list ATM
locations in countries around the world.
Can't escape those surcharges
Withdrawing cash at overseas ATM may be the cheapest way to get
foreign currency while traveling, but it's not as good of a deal
as it used to be. The reason? Those dreaded ATM surcharges.
Most bank-owned ATMs outside of the United States
do not charge fees. But there's a good chance your own bank will
zap you with a fee when you withdraw cash at an overseas ATM. Fees
range from $1.50 to $5.
National City, SunTrust and Bank One all charge
customers a $1.50 fee for using another bank's ATM.
"It doesn't matter if it's down the street
or across the Atlantic," says Robin Yocum, a spokesman for
Bank One. "It's going to be $1.50."
At Citibank, ATM fees vary based on the customer
"If you pay $1 to use someone else's ATM
normally then you'd pay the same overseas," says Mark Rodgers,
a spokesman for Citibank. "If you normally don't pay those
charges you won't pay them overseas."
With First Union's Custom Banking and Prime
Banking checking accounts, you get two free visits to a non-First
Union ATM each month. First Union's College Express checking account
allows four free visits to a non-First Union ATM each month. Once
the free visits are used up, an overseas traveler would be charged
a $1.50 fee per ATM withdrawal.
Bank of America's ATM policy may be the most
confusing and costly of all.
First the good news. Beginning July 1, customers
of Barclays in the United Kingdom, Deutsche Bank in Germany, Scotiabank
in Canada and Westpac in Australia and Bank of America will have
free access to each other's ATMs when they travel. A free visit
to another bank's ATM is always a nice thing.
But things aren't so nice when a Bank of America
customer withdraws cash from an ATM outside the Global ATM Alliance.
Bank of America charges a 2-percent fee plus a $1.50 to $3 fee each
and every time a customer uses an overseas ATM that is not in the
A Bank of America customer who withdraws $100
in British pounds from a non-Barclays ATM in London could end up
paying as much as $5 in fees. Ouch.
Finding ways around the fees
To limit ATM fees while traveling, consumer experts urge people
to make one or two large withdrawals as opposed to five or six smaller
ones. Most banks limit ATM withdrawals to $200 or $300. You may
want to ask your bank to raise this limit before you head abroad.
What should you do if you have lots of local
currency and are about to leave the country? Widzer suggests paying
your hotel bill with the leftover cash.
Be sure to check out the overseas fee policies
on your credit and debit cards before taking off on your trip. Pack
cards with the most traveler-friendly policies. The money you save
is well worth a few phone calls.
"Be as informed as possible," says
Don George, travel editor for Lonely Planet Publications. "You
can make the best deal for yourself that way."
Editors' note: Please also see our newest story on the topic