Credit Card Fees and Currency Concerns – Ask Alex – Travel Question Wednesdays

Posted on / by Alex Berger

Ask Alex - Travel Question Q and A every Wednesday

This post is part of the Ask Alex, Travel Question Wednesdays weekly series. To see previous questions click here.  To submit your own; tweet it to @AlexBerger, ask it in a comment on this post or send it in by e-mail.

A quick introductory note – When I began authoring VirtualWayfarer in July of 2007 I never expected that I’d still be blogging on travel, adventures, study abroad and everything that goes with it nearly five years later.  Over the years I’ve had a lot of questions and luckily my friends, network, and more than a few random strangers have gone well out of their way to answer those questions. While I still find myself asking questions on a regular basis I’ve found that I can also pay it forward as a resource for friends, my readers, and strangers alike.  In an effort to share what I’ve learned from my various adventures I’ve launched Travel Question Wednesdays. I’ll be answering one reader-submitted question every week.  You are all encouraged to submit, and all past questions will be archived and available as a resource for readers of this blog. I’m going to take a very open approach to the topics I’ll cover, so feel free to ask me just about anything , just keep it somewhat travel related.

This week’s travel question is from Felice D. she asks,

Q. “Clarify the best way to get and spend other currency: credit union card? no exchange fee but processing fee? bank card? atm? pay with credit card? cash? and….how to recoup VAT sensibly”

A.p2 – I’ll start with your VAT (Value Added Tax) question first, as it’s the hardest to answer. Unfortunately, it’s not something I have a lot of experience with or have been able to find a good resource for. The way I travel most of my expenses are not eligible for VAT refunds. The process for claiming VAT also tends to vary widely from country to country and is dependent on the type of travel you’re doing. VAT for tourism and personal travel is different than VAT reclaim options for business travel. One of the best writeups I’ve found is tailored to Italy but should offer insights for reclaiming VAT in most places. Head on over and check out WhyGo Italy’s “How to get a VAT refund in Italy” post. On the flip side if you’re a business traveler one useful guide I tracked down is Deloitte’s European VAT refund guide 2011.  At the end of the day you’ll need to spend some time running a few web searches on the specific VAT policies of the country you’re visiting.  Consider how obnoxious the process is (eg: Italy) and how high the threshold is (eg: Denmark’s ~$50 minimum per shop). Also keep in mind the items that qualify for a VAT refund and if it makes sense to pursue.  In most cases you’ll probably find that it’s not worth the hassle.

A.p2 – Circling back to the first part of your question – there are a lot of different options for converting your cash to a foreign currency.  Which is right for you will depend heavily on the nature of your financial situation.  Different banks charge significantly different fees.  The fee structure also tends to vary between Checking/Savings and Credit Card accounts. I’ll answer these questions tailored to US bank accounts, but the advice will be similar for international readers as well.

When using a Credit Card abroad it is not uncommon for many users to get hit by 2-4 fees simultaneously.  For Checking/ATM withdrawals these usually come in the form of an ATM service charge for out of network use (as much as $6 per bank) and a currency exchange fee (often 3%). When using your Credit Card abroad many charge 3% per transaction, while many vendors will also charge a point of sale surplus charge of up to 3%.  Never use your Credit Card for a ATM cash advance abroad, only use your Checking/Savings cards at ATMs while traveling. Also, for fraud prevention reasons I suggest only using Credit Cards (not debit cards) for point of sale (non-ATM) purchases.  Despite how expensive the ATM/Credit Card combination is, it’s actually often the cheapest option and the one I prefer.

Luckily, if you’re smart about it you can cut many of these fees out. Unfortunately, it may require kicking your bank or existing credit card to the curb.  FlyerGuide maintains a fantastic list of different bank’s and their card fees. Different cards provided by each bank will also have different fees. For international travel CapitalOne has made a reputation for itself by waiving the 0% international transaction fee on its cards. This in turn has started a trend which is being duplicated by some of the other banks.  For low-fee, or waived-fee ATM use abroad, you’ll likely have to go to a Credit Union or carry a large balance in your accounts. While this can cut the fee, it can also limit where the card can be used, so do your research ahead of time.

I suggest avoiding the use of traveler’s checks. While they can still be useful in some limited situations, the general consensus within the community is that they’re typically far more hassle than they’re worth.

Similarly, avoid currency exchange booths whenever possible.  Not only do these tend to charge obnoxious fees, they also will give you extremely bad exchange rates.  It’s not uncommon to see people leave 6-10% of their cash value at the currency booth when using these vendors.  Regardless of the various promises they may make or claim.

Money wires tend to be extremely expensive.  Unless it’s an emergency you’ll want to avoid these wherever possible.  If absolutely necessary explore online services designed as disruptors such as PayPal and its competitors.

Another option is to purchase your currency before your trip. This can be done through your bank, or a third party and is usually relatively affordable. Unfortunately, it also creates a huge problem for travelers traveling over an extended period of time or with healthy travel budgets.  If you expect your trip’s cash based expenses to be more than $1,000 USD (which is probably conservative for most of you), keep in mind that you’ll be stuck carrying that money during your trip.  If you get robbed, lose a bag, or somehow are separated from that currency you’ve lost far more than the 3-5% max you might have paid using a carefully selected Debit/Credit Card combination. For this reason I almost never travel with more than $200-300 USD in local currency on me (and usually have far less on my person).

Ultimately the best approach will also depend on the region you’re visiting.  Keep in mind that different banks and card services (MasterCard, Visa, etc.) are accepted to varied degrees from country to country.  Similarly, your cash will go much further in some countries than it will in other’s requiring fewer ATM withdrawals.  The level of crime in a country is also a key factor when deciding how much money you should keep on your person.

Hopefully this helps you as you prepare for your next trip.  Did it lead to a more specific question?  Feel free to ask in a comment below.

Please keep in mind that the above are general suggestions based on my personal experiences and research, not financial advice.  The material covered in this post is constantly changing, so make sure to do your own research using what I’ve shared as a foundation and a baseline to help you in the process.

Felice, thanks for a wonderful question!  To my readers – have a question of your own?  ASK IT!   Want to see previous questions? click here.


Alex Berger

I am a travel blogger and photographer. I also am involved in academic research into the study abroad and backpacker communities.


  • Jakori
    January 25, 2012

    It can be very expensive to get your currency exchanged at currency exchange establishments at your destination. After traveling throughout Europe for some time now, I can say if you so decide to switch your currency at your destination, do not do it at the airport and make sure you shop around the city to find the best rates. You will be amazed the different rates you will be given just from going from one place to another.

  • Elena
    January 25, 2012

    Believe it or not, in China the best place to change money is in banks. They will usually give you the best rate and charge the least commission.

    Also, if you’re from Australia expect the transaction fees to be higher when withdrawing using a credit/debit card, and don’t expect any banks to waive the commission or fees…Just another great thing about coming from a small market 🙁

  • Dan
    January 29, 2012

    Good advice Alex

  • Travel Clinic
    February 14, 2012

    Great tips! I would normally change my money at the airport or at the bank, I thought it would be the best way and save you time instead of looking for the best money changer in the area. I didn’t consider withdrawing from my card since it’s really expensive.

  • Jessica
    March 28, 2012

    Thanks for the shout-out, Alex! I just saw this. 🙂

  • Elena Barbini
    August 7, 2014

    Hello! I am Elena from Italy!
    I appreciate your posts a lot, I find them very helpful and inspiring! 🙂
    I start a Master Programme in Copenhagen in September and I am thinking to open a Danish bank account.
    I wanted to ask if you can give any advices about Danish banks which makes it cheaper to withdraw in the € zone or transfer to € bank accounts – if there’s any!
    Or in alternative, are you aware of any particular offer for students and so on? (when I went on Erasmus in Paris a bank had a special agreement with the University, this is why I asked!).
    Thanks a lot for ur time!!

    • Alex Berger
      August 7, 2014

      Hi Elena,

      I’m not sure if things have changed, but the bank most of us signed up with was Nordea because if you’re under 29 they had a free student account. The downside is their online website portal is in Danish (not English), so that can be a little tricky. Ultimately almost everyone ends up using either Nordea or Dansk Bank. I don’t know about fees within the EU or Euro to DKK transfers. Part of that will depend on your Italian bank. As an American I had nasty fees from my American bank and then fairly frustrating ones from the Danish bank as well. So, that may shape if you do a big transfer or a series of smaller ones.

  • Elena Barbini
    August 7, 2014

    Hi Alex!
    Thanks a lot for answering right away! Your information has been very helpful!

    yes, my Italian bank makes it quite expensive to pay/withdraw/transfer out of the Euro zone, which is why I was thinking it might be more convenient to open a Danish bank account !

    again, thank you very much.. or tak 🙂

    • Alex Berger
      August 7, 2014

      Eurozone or off the Euro? Denmark is within the EU, but doesn’t use the Euro. However, as I understand it the DKK is actually pegged to the Euro and thus effectively the Euro but with a DKK name. If that helps/makes sense?

      • Elena Barbini
        August 8, 2014

        *yes I meant Eurozone as in €zone , I didn’t refer to the EU or the Continent! 🙂


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