Credit Card Tips for International Travelers

Credit cards can be a convenient way to pay when traveling overseas, but using the wrong card can add extra fees and complications to your purchase.

Many credit cards charge as much as a 3 percent transaction fee for all international purchases.

In addition, some issuers charge a fee if a purchase is processed by a bank outside the United States, even if you never leave your home.

If you purchase something online from another country or purchase an airline ticket or hotel room with a foreign company, you could be charged a foreign transaction fee of up to 3 percent.

“Before you leave the country or order anything from a merchant that is not based in the United States, it is a good idea to call your issuer and ask about the foreign transaction fee,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. “You can save yourself some money by using a credit card that doesn’t charge a fee for foreign transactions.”

According to a study by Pew Trusts in 2010, 91 percent of bank cards charged an international transaction fee. However, in an attempt to attract affluent cardholders with high credit scores and low risk, some issuers have dropped the international transaction fee from selected credit cards. American Express dropped the 2.7 percent fee from its Platinum and Centurion cards. Chase eliminated the 3 percent fee from several upscale travel cards including the Marriott Rewards Premier card, Chase Sapphire Preferred, British Airways Visa Signature, and United Mileage Plus Club Visa. Citi erased the fee from its ThankYou Premier and ThankYou Prestige cards.

Capital One has never charged a foreign transaction fee on any of its cards.

Current rates for international transaction fees:

Capital One–0%

PenFed Travel Rewards American Express–0% Discover–2% American Express–2.7% Bank of America–3% Chase–3% Citi–3%

Using a credit or debit card at foreign ATMs can also add additional fees. Before departing, also ask your bank what the charges are to use your card at “foreign” ATMs. In addition to the international transaction fee, the ATM may also charge its own fee for withdrawals. If you plan to use your debit card, contact your bank to see if they have partner banks in the areas you are traveling. These partner banks may waive the withdrawal fees. Bank of America is a member of the Global ATM Alliance Bank that waives the fee if your bank is a member.

ATM fees on international transactions vary widely. Chase assesses a $5 withdrawal fee for non-Chase withdrawals outside the United States plus a 3% conversion fee. Citi charges a 3% fee after conversion to American dollars.

Here are some other credit card tips for international travel:

* Avoid using your credit card at an ATM to get cash. The fee is typically 3%. You will also immediately be charged the much higher interest rate for cash advances. The cash advance rate can be as high as 25% for some issuers.

* Take a second card in case your primary card is not accepted.

American Express is not accepted everywhere, so have a MasterCard or Visa as a backup card. Discover does not have an extensive network in Europe and probably should not be your primary card.

* Notify your bank and credit card issuer about your trip. While you are asking your bank about foreign transaction fees, tell them that you will be using your card while traveling out of the country.

Otherwise, the foreign charges may raise a red flag with your issuer and a freeze could be placed on your account.

* In case you run into any problems, take the phone numbers for contacting your issuer from outside the United States.

* Before you order dinner or make any purchases, ask if the restaurant or merchant can process your credit card. Many countries use the chip and PIN system and no longer accept the American magnetic strip credit cards, and this can be a problem for American travelers. Credit card issuers have been slow to adopt chip and PIN, but this is changing with smartcards and smartphones.

Common in Acquiring, Sharing of Bad-Merchant Data Comes to the ACH

Taking a cue from bank card merchant acquirers, bank processor Fidelity National Information Services Inc. (FIS) and NACHA on Monday announced the formation of the Terminated Originator Database, a new service to help banks identify businesses that other banks have cut off from originating automated clearing house transactions because of high risk.

NACHA selected Jacksonville, Fla.-based FIS as its preferred vendor to operate the service, which FIS switched on March 1 but didn't announce until NACHA's Payments 2011 conference this week in Austin, Texas.  A recent NACHA board policy statement encourages but does not require banks to use the TOD service, which depends on financial institutions reporting high-risk businesses to it. In that respect, TOD bears some similarities to the three major credit-reporting agencies, Experian, Equifax, and Trans Union, all of which depend on banks and credit unions to regularly submit reports about their customers' loan-repayment behavior.

"The value of this is the collaboration," Dennis Maicon, vice president of product management in FIS's Risk, Fraud, and Compliance Solutions unit, tells Digital Transactions News. "It's the information sharing that's the first of its kind."

The first of its kind for the ACH, that is. Rather than consumer credit-reporting agencies, TOD is most similar to a system bank card merchant acquirers have used for years, a system known as MATCH, for Member Alert to Control High Risk. NACHA president and chief executive Janet O. Estep, a former acquiring executive with U.S. Bancorp, notes that MATCH takes in reports from acquirers about merchants the processors banned from card acceptance because of high chargebacks, and identifies those merchants to other processors so that the risky businesses can't get merchant accounts again.

Herndon, Va.-based NACHA's risk-control staff several years ago launched the so-called Originator Watch List, or OWL service, a database of suspect originators, but TOD is more comprehensive. "This is one tool for a financial institution's due diligence," Estep said at a Payments 2011 news conference. "It is new to the ACH network."

FIS has a Web site for financial institutions to report terminated ACH originators. The site includes reason codes for the termination. Pricing includes a signup fee and then per-transaction or subscription fees, or a combination of both. Pricing also depends on the size of the institution by assets. FIS didn't disclose details. To get the system up and running, FIS is offering "financial incentives" to early adopters, Maicon says.