How to use credit and debit cards abroad

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Ed Perkins

If you’re heading outside the United States, you will have to cope with foreign exchange. And despite all those stories you see about currency “secrets,” what you need to know is really pretty simple.

Overall, your best bet is to use plastic as much as possible: credit cards for big-ticket purchases, debit cards for local cash.

When you use a credit card outside the U.S., the most you lose on any transaction is 3 percent, as long as you don’t fall for a scam. Almost all credit cards issued by U.S. banks carry no more than a 3 percent conversion fee, and over the last few years, most of the big banks now issue at least one card with no foreign transaction fee.

At most, you still pay the 1 percent fee that international MasterCard and Visa networks charge for making the actual conversion, but that’s trivial.

Credit card concerns

Unfortunately, the credit card isn’t as foolproof as it could and should be:

• Although your current card is as likely as not to have a chip on it, most U.S. chip cards still require a signature rather than a four-digit PIN when used. And although merchants almost everywhere accept chip-and-signature, a few automated ticket and gasoline dispensing machines require a PIN.

Over the last three years, I’ve used a chip-and-signature card in a dozen countries, and the only time it didn’t work was at an automatic gasoline pump in Mount Cook, New Zealand.

I’ve asked experts several times, but nobody can give me a coherent reason why a chip card can’t be designed to use either a PIN or a signature, depending on the local hardware, but that hasn’t happened. For now, you’re stuck with chip-and-signature, but that’s apparently a relatively minor problem.

• The rip-off you’re most likely to encounter is a seller’s attempt to get you to accept a billing in U.S. dollars rather than local currency. When a seller bills in dollars, the seller sets the exchange rate — which is almost always a lot worse than the official rate. You won’t avoid any foreign exchange surcharge, either; your bank adds it on any charge originating outside the U.S. regardless of currency.

Using debit cards

The situation with using debit (ATM) cards for local currency is a bit more complicated. When you withdraw cash from a foreign ATM, your own bank may add a transaction fee, a conversion fee, or both, and the bank that operates the ATM may also add a charge.

Your best approach here is to use a debit card issued by a U.S. bank that does not surcharge foreign withdrawals and absorbs foreign-bank fees. This includes a handful of online banks, many savings banks, and many credit unions.

If your regular bank’s ATM policy is not friendly to foreign travelers, I suggest you do as I do: find an online or savings bank that absorbs foreign ATM fees, maintain a small account with that bank, transfer funds into it for foreign trips, and use its debit card for whatever currency you need.

Regardless of which debit card you use, you have to be careful about where you use it. In recent years, retail foreign-exchange outfits such as Travelex have made exclusive ATM deals with major airports, and they’ve recently expanded into city areas where tourists tend to congregate.

The scam here is that although these ATMs add no fees, they make the exchange at a really bad rate — as bad as they give you at the retail counter, which is usually very bad indeed. When you need local cash, make sure you get it through a major bank, not a foreign exchange outfit or a local retailer.

And what about exchange rates? I’m glad I don’t speculate in currencies, because I thought the pound would bounce back quickly after the Brexit vote shock, and that the euro would take a hit. Neither happened.

So at least for now, with the pound still near a 10-year low, Britain is relatively affordable. The Canadian dollar, euro and Swiss franc remain pretty stable.

Send your e-mail to Ed Perkins at Also, check out his new rail travel website at

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