Credit Card Costs

[VivreManger]

As some of you may remember, I have been looking into the unannounced charges that credit card companies attach to your charges.

The United Airlines frequent flyer credit card adds a 1% to every purchase in a foreign currency, over and above the 1% that Visa/Mastercard charge. I assume that other frequent flyer credit cards do the same.

The only credit card -- discovered so far -- that offers a no-charge card with some form of mileage benefit is the MBNA World Points card. Its airline ticket benefit is even more restrictive than the airline cards, but its points can be redeemed for hotel charges, rental car fees, merchandise, and even cash, a return of $4 for every 500 points. In my head that return is the princely sum of .8%, that is .008. It is not apparent from the details I have reviewed so far that actual mileage flown gets any points.

Does any one know any better deals?

[bigbear]

This link might help a bit.

[Bux]

This link might help a bit.

One of the reasons this thread is in the France forum, is that a major concern here is the loading of a foreign currency conversion surcharge. Chase, for instance, adds two percent to every transaction made in a foreign currrency. That's got to wipe out any reward value on your travel expenditures. Unfortunately, this fee that is not even mentioned on the FAQ page. Banks have been known to be rather unforthcoming when asked about this fee and you will see no indication of it mentioned on your statement. It's up to you to know the wholesale exchange rate at the time your transaction is posted. The only place you are apt to find this charge mentioned is in the fine print of the service agreement, that so few people thoroughly read.

By the way, Discover card is unusable in Europe as far as I know.

[bigbear]

I remember someone saying that they used their brokerage's debit card to avoid the 1 to 3 percent surcharges altogether. There's no rewards though.

[Beachfan]

The little known Amtrak card is free, earns points on a couple of airlines, and does not have an additional conversion fee (over the standard 1% that Visa/Mastercharge charge and everyone passes it on). It's considered the best card by a large percentage of the people who angst over these things. I use it for foreign travel.

Another good deal is the AAA club cards. Free, no additional conversion fee and best of all, you can charge travellers checks like a purchase if you do it at the AAA office.

But for travelling abroad, the best thing is my Schwab debit card. No charges at all other than the standard 1% conversion fee - no ATM charges by Schwab (sometimes the host machine will charge), no commission, etc.

[VivreManger]

I did follow up Bigbear's link to the LoCredit website. Thanks for the suggestion.

Unfortunately the information provided there is minimal. The links to the recommended cards are not helpful since the linked sites are uninformative and even fail to provide a phone number for further clarification.

I did email the LoCredit info site itself -- again no phone number -- and promptly, to their credit, they sent a reply. I asked about low or no charge foreign purchases. I asked how the MBNA World Points Card compared with what they featured.

The second question was ignored. The first was -- to put it charitably -- misunderstood. Instead of highlighting the lowest charges, they offered the highest: The Chase Card, once again. Their motto seems to be cut to the chase. I suspected they are the sponsor of the site.

Thanks for the other suggestions. I will call AAA and google Amtrak.

Edited June 4, 2003 by VivreManger (log)

[mogsob]

Debit cards are the best in Europe, as you avoid conversion fees and ATM fees. Mine is through Chase Private Bank.

[VivreManger]

My local bank ATM, which I have kept separate from my credit card, avoids ATM charges and I suspect conversion fees as well. At least so they claim. And when I have checked the actual rates, the results in the past seem to confirm them.

However I suspect that not all debit cards are the same. In my case I don't see transferring everything to Chase as a quick and appealing solution. Do debit cards also give travel points?

Anyone have any experience with non-Chase debit cards that would confirm moqsob's suggestion?

[Bux]

I also contacted that credit card site.

I find no mention on your site of the "foreign currency conversion surcharge." This is of no concern to those who do not travel abroad, but could add two or more percentage points to vacation or business trip and is therefore of great concern to those who travel abroad frequently.

The response I got was:

We actually do mention this in some of our reviews. Chase Platinum, the #1 card on our site has the lowest foreign transaction fee- 2%.

I replied saying I knew of several banks without any surcharge and that the savings for a frequent business or pleasure traveler would be greater than the absence of any other fees. Their first reply was very prompt -- within a few minutes at 11:00 p.m. There has been no response to my second message as of 10:00 a.m. this morning. My first impression is that this site is not very thorough in it's research nor does it offer the kind of public service I would like to see.

[Bux]

Debit cards are the best in Europe, as you avoid conversion fees and ATM fees.  Mine is through Chase Private Bank.

Mogsob, we may have touched on this before, but are you absolutely sure your Chase debit card has no foreign currency conversion load? I ask only because several years ago I was told by a Chase representative that my Chase debit card did not have the surcharge. I then proceeded to pay for a stay in France using that card. Subsequently, I opened another account at another bank and on my next trip, withdrew 100 francs from each bank in rapid succession. The charge on my Chase account was exactly 2% more than on the other account. Thus I was not only taxed 2% by Chase, but I lost the float. I have never been a private banking client of Chase, but I have had select, and whatever they called that level of account before the last merger, accounts. Needless to say I was pissed about the misinformation and moved my primary accounts to the other bank where I may have other accounts, but at least I've gotten straight answers -- so far.

[VivreManger]

(Bux Posted on Jun 4 2003, 07:21 AM )Their first reply was very prompt -- within a few minutes at 11:00 p.m. There has been no response to my second message as of 10:00 a.m. this morning. My first impression is that this site is not very thorough in it's research nor does it offer the kind of public service I would like to see.

I had the same experience with LoCredit. The follow-up question that zeroed on the foreign currenct tax has still gotten no response.

[pirate]

American Express adds 2%. With the Costco Platinum Cash Rebate American Express I get 1.5% back when I've spent over $5000. Before $5000 rebates are less.

An inquiry to HSBC elicited this reponse:

Thank you for your recent e-mail to HSBC.

HSBC does not add a surcharge for purchases made outside of the United

States. These transactions can be made on a Credit or Debit Card.

Our Direct Bank is always available, 24 hours a day, 7 days a week to meet

all of your banking needs. Just e-mail us at globalinfo@us.hsbc.com or

call 1-800-975-HSBC (1-800-975-4722), and speak with one of our

professionals.

[menton1]

The problem with determining the fees charged is that most cards just put a dollar amount, they cleverly don't break down what exchange rate they use, what percentage fee, and/or what flat fee charged. It's almost impossible to calculate without this information. I found a fairly good web site discussing the topic, and this page shows that just about ALL Debit cards have hidden charges, and another click will display a chart saying that First Union Credit Card is the best, with NO added percentage, and a small $1.50 for ATM withdrawls. Foreign currency conversion fees

I believe there was also a court case where several credit cards were ordered to refund these fees to customers.

[Bux]

Pirate is correct about HSBC. It has one of the most international outlooks of any US bank and you will find its logo not only on banks bearing the HSBC name, but on others including CCF in France. When I mentioned the possibility I might want an account in France and before we could make up our mind as to its usefulness, an officer in my HSBC branch got all the papers in line for me to open a CCF account in France. We never opened that account, but I was impressed by the work done on my behalf.

In noting that American Express charges 2%, it should be mentioned that Amex does its own conversion and thus you avoid the 1% Visa or MC would charge. Thus it's comparable to a 1% surcharge, which, with the rebate, amounts to one half percent less than I'm paying on a no surcharge card.

The ATM usage fee is yet another cost. The page linked to in Menton's post does a good job at explaining this. This is applicable to bank and debit cards issued in the US. One should never use a credit card (or only use it as a last resort in an emergency) for cash. This may be the easiest fee to avoid, but it may require you to maintain a large deposit in your account. Some banks require a large cash deposit and others consider an even larger investment account sufficient reason to waive ATM fees. I believe both Visa and MasterCard prohibit the machine owning bank from charging a fee to overseas card holders.

[bigbear]

Another little quirk that I have noticed in the past. I have charged an expense in a foreign country whose currency was falling in value against the US dollar. By the time the charge appeared on my statement in dollars, the exchange rate used was more in my favor than the actual date of the expense.

[menton1]

In noting that American Express charges 2%, it should be mentioned that Amex does its own conversion and thus you avoid the 1% Visa or MC would charge. Thus it's comparable to a 1% surcharge, which, with the rebate, amounts to one half percent less than I'm paying on a no surcharge card.

Bux, you lost me on this one. How does 2% work out to be LESS than 1%??

On another note, I checked with MBNA Visa, and they also say that they add no other charges other than the standard 1% that Visa USA gets. But Bux, are you saying that it's still better to use Amex when you can? (Tough to use Amex in France)

[Beachfan]

Debit cards are the best in Europe, as you avoid conversion fees and ATM fees.  Mine is through Chase Private Bank.

Most debit cards in the US tack on an additional 2% over the 1% interbank rate (total 3%) when they convert cuurency.

Moral: Always keep those fine print service agreements.

Edited June 4, 2003 by Beachfan (log)

[Bux]

In noting that American Express charges 2%, it should be mentioned that Amex does its own conversion and thus you avoid the 1% Visa or MC would charge. Thus it's comparable to a 1% surcharge, which, with the rebate, amounts to one half percent less than I'm paying on a no surcharge card.

Bux, you lost me on this one. How does 2% work out to be LESS than 1%??

On another note, I checked with MBNA Visa, and they also say that they add no other charges other than the standard 1% that Visa USA gets. But Bux, are you saying that it's still better to use Amex when you can? (Tough to use Amex in France)

2.0% charge by Amex for foreign currency conversion

1.5% rebate using Costco Platinum Cash Rebate American Express card

0.5% net cost

Using a credit card without a bank loaded surcharge, you will pay 1% to Visa or MasterCard for their work in making the conversion.

Thus, that particular Amex card is the best possible deal, assuming two conditions beyond just using the Amex rebate card. One is that you've already charged $5,000 on the card and the other is that you can use the card. Visa and MasterCard are far more easily used in France these days.

[VivreManger]

I think that IF indeed -- a big if -- the MBNA World Points credit card works as I understand the fine print and as has been explained to me by their sales representative, it seems to be the best deal.

First, no annual fee.

Second, unlike Costco AMEX Card, no minimum charges before rebate kicks in.

Third, much greater world-wide acceptability of Visa/MC versus AmExpress.

Fourth , no foreign currency exchange fee, beyond the 1% base that Visa/Mastercard charges on all transactions.

Fifth, rebate points ($1=1 point) that can be converted into cash, airline tickets, hotel rooms, car rentals, etc. The rate of the effective rebate ranges from .008, i.e. .8%, on cash to .016, i.e. 1.6% on airtickets. I haven't done the math for the other options.

Thus,

1% charge by Visa/MC for foreign currency transactions

minus .8% minimum rebate 1.6% possible maximum

net cost .2% at the worst

and a net gain .6% is possible at best.

Check this out.

Edited June 5, 2003 by VivreManger (log)

[VivreManger]

HSBC unfortunately does not market its products, credit card included, outside NY State.

[bushey]

Has anyone used the AAA Passport Cards? My understanding is that you can set the amount of money available on the card and use it in ATMs overseas.

Our oldest daughter (17) will be in Europe this summer on a concert tour and we're looking for the best options for her. I'd like to order some Euros and Swiss francs ahead of time (say 20/day from lunch and incidentals) and the AAA Passport card seems like a convenient way for her to be able to withdraw additional money if she wants to do additional excursions, purchase items, etc. AAA also has a Visa card which we could obtain with a ceiling limit for her.

Also, if we get travelers' checks as back-up should we buy them in Euros or US dollars? Trying to balance what's the least hassle for her with ease of cashing in if she has any left. I know, a young lady on first European trip will not likely have any money left......

[VivreManger]

My instinct is to go Euro, but the question is what kind of exchange rate is AAA offering and how does that compare to other current rates -- if you can obtain them?

Presumably with Euros in hand she would not have to hassle exchange charges and banks outside of Switzerland, where the ATM system functions pretty smoothly.

I presume there is no charge for the travelers' checks themselves.

Do you have a regular AAA Visa/MC card? What has your experience been with it? Did you ever have any problems getting it -- or whatever other card you used -- getting it accepted overseas?

[pirate]

Traveler's Checks from AAA in Euros is best bet. You buy at bank exchange rate ( no percentage fee added) in at AAA in USA and as AAA member no traveler's check fee. You get exactly that many Euros in Euroland. With dollar traveler's checks in Europe you usually get a poorer rate than for American dollars in cash THe Swiss keep their exchange rate aligned to the Euro and many places in Switzerland take payment in Euros.

[Bux]

My instinct is to avoid TCs except as a backup. My general advice is also to buy curency in the country in which it's legal tender, i.e. dollars in the US and euros in Europe.

I have no familiarity with dealing with the AAA and have not been aware they are operating as a bank. I have always thought they sold Visa traveler's checks and I have always understood the rate is not all that good when buying checks in euros. If I'm wrong on this and you get, as Pirate implies, the wholesale interbank rate, it may be a good deal.

I've called AAA and they tell me members can buy TCs in euros at the rate shown at:

http://www.travelex.com

Right now that's .79 euros to the dollar

http://www.oanda.com/

Onda shows a .859 exchange rate. I believe that using your credit card will therefore get you .85 euros to the dollar, barring your bank's loading of a surcharge. That's a loss of about six european cents on the dollar, or a worse than six percent tax on your money.

Your daughter will also have to deal with the checks in Europe. My experience with TCs in Europe is limited mostly to France where they are not nearly so easy to use as they are in the US. She may have to cash them at a bank and probably pay a fee to do so. That was my daughter's experience many years ago. She cursed the checks and dumped them all into currency in one fell swoop at a bank as I recall. In her case the checks were a back up. What happened was that her new ATM card took over a week to get on the system.

Furthermore, should your daughter have any checks left over when she returns, they will have to be reconverted at another loss.

My questions about using the AAA cards are the same as for any bank credit or debit card. What is the surcharge for foreign currency conversion and what are the fees for getting cash? On a credit card, you don't withdraw from an account, you make a loan (cash advance).

I understand that when dealing with a $20/day budget, we're talking about a dollar a day and ease of use may be more important than cost. In that case, I'd go with an ATM card (bearing either Cirrus/MC or Plus/Visa logos) connected to a checking account in a US bank (assuming you are an American, I'm taking AAA as that clue) and having her withdraw as much as she felt comfortable carrying at any one time. I don't see the AAA as useful. All they offer is the no fee on the TC, which I don't recommend carrying in Europe.

[pirate]

Bux. Sorry. AAA used to use American Express rates. I didn't realize they switched to Travelex. Obviously they are now profiteering.