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How to save money when you make overseas purchases with a bank card

Credit and debit cards are great for using when travelling overseas. However, they’re not so great when you return home to discover all the usage charges on your statement. Learn about the charges and how to avoid some of them to reduce or remove the fees you pay…

Woman paying for drinks with bank card

Payment by credit, debit card and pre-paid card is so common and popular now that it’s extremely unusual to find a place that doesn’t accept them. In fact, there were 19.50 billion cards in circulation worldwide at the year-end 2016. According to a Nilson Report (May 2017), credit, debit, and prepaid card transactions for goods and services worldwide reached US$257.17 billion in 2016 (Visa, UnionPay, Mastercard, JCB, Diners/Discover, and American Express).

There are, of course, benefits of using cards rather than cash or Travellers Cheques, including:

  • Competitive exchange rates
  • Legal protection on purchases and protection if the card is used fraudulently.
  • Convenience of not having to exchange currency

However, expat card users, whatever country they travel to, need to be aware of charges that can be racked up using a card overseas.

Charges to avoid

According to the Money Advice Service, there are four main charges that you might find yourself paying when you use your bank cards abroad:

  1. The foreign usage fee: At the end of each banking day, all your charges will be added up and converted to your home currency. The charge made by your card company will depend on the day’s exchange rate, but you can generally expect to add about 3%.
  2. Cash withdrawal fee: Expect to be charged 2.75%-3% each time you withdraw money. In addition, the foreign usage fee will be added to the transaction. Different banks charge different fees, so it’s a good idea to ask, particularly if you have more than one card, so that you can choose the best one to take overseas.
  3. Credit card interest: If you use your credit card to withdraw cash, you will be charged interest on the amount withdrawn (as well as the other fees), even if you pay off your entire credit card bill at the end of the month. So try not to use a credit card to withdraw cash, use a debit card instead.
  4. Fixed flat fees: Some bank cards charge a fixed fee of about €2 every time you use it.

Credit card statement close-up

Just imagine withdrawing €100 for a meal using your credit card. As well as the cost of the meal you could potentially pay another €9 in fees:

  • €3 for the foreign usage fee
  • €3 cash withdrawal fee
  • €1 in interest
  • €2 just to use the card

Here’s how to save some money when you use your card overseas

  1. When asked at the point of sale if you would like to pay in the local currency or your card’s home currency, chose ‘local currency’ as you will get a better exchange rate and you won’t have to pay a conversion fee. (Read a full description of why it’s better to go local in ‘Should You Pay in Local Or Home Currency When Traveling?‘)
  2. Take out as much cash as is practical and safe in one go. If you get smaller sums out in multiple withdrawals, you will pay the transaction and usage fee each time.

Woman traveller paying using card and app

I’ve been researching overseas payment options in some depth with my son who recently set off on a gap year and wanted a safe and convenient way to pay for accommodation, food and travel. We considered the usual credit cards and debit cards (Travellers Cheques seemed too outdated). In the end, my son decided on a pre-paid card by Monso (was Mondo). The features and benefits – such as being able to freeze it if it’s lost with a tap on the app, and fee-free purchases – made it an easy choice.

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