The best way to pay when you?re abroad

By Herb Weisbaum, The ConsumerMan

When you travel outside the U.S., be sure to pack the plastic. A credit card is safer than cash, better than a debit card (more fraud protection) and you'll get the best currency exchange rate.?

?It?s the smartest thing to do,? says Odysseas Papadimitriou, CEO of the credit card comparison website CardHub.com.?

In June, Card Hub surveyed the exchange rates for converting U.S. dollars to euros offered by a number of big banks and a Travelex location at New York?s JFK Airport with paying on the spot with your Visa or MasterCard.?

Visa and MasterCard won hands down. Their exchange rate was much better.?

The credit cards provided an average savings of 8 percent when compared to the banks and a whopping 16 percent compared to the airport exchange service.?

But those savings can shrink if your card has a foreign transaction fee. Most credit cards (Card Hub says about 90 percent) charge a fee to convert purchases made in another currency to dollars.?

These fees range from one to three percent. Card Hub says the average fee is about 2.4 percent. This can add a significant cost to your travel expenses. So check your credit card agreement.?

Capital One has never charged a foreign transaction fee on any of its cards. Both Discover and Pentagon Federal Credit Union (PenFed) recently eliminated this fee from all of their credit cards.?

Chase doesn?t charge a transaction fee on its new Sapphire Preferred card. It?s a top-pick by various credit card comparison sites because the Sapphire card offers a huge initial bonus: 40,000 extra points if you spend $3,000 in the first three months. That?s equal to a $500 reward towards your travel.?

There are other options. Some airline and hotel credit cards may not have a foreign transaction fee.?

If your card charges a foreign transaction fee and you?ll be spending a lot on your trip, you may want to consider getting another card.?

?Anything you can do to avoid that two or three percent fee is certainly worth it,? says Bill Hardekopf, CEO of LowCards.com.

You can compare foreign transaction feesfrom various issuers at CreditCards.com. Or compare cards
with no foreign transaction feeat Cardhub.com.?Nerdwallet.com has just published a list of its picks for best cards with no foreign transaction fees.

Pay in the local currency??
A merchant in another country might offer to convert your purchase into dollars as a customer service. Don?t do it. You?ll get a terrible exchange rate. The merchant makes money ? you lose.?

?It?s really better to pay in the currency of whatever country you?re in,? says Ben Woolsey, director of marketing and consumer research at CreditCards.com. ?Don?t consider it a convenience to have it converted into U.S. dollars at the point of sale. Let your credit card handle that on the back end.?

A few more tips for foreign travelers

• Let your credit card company know about your travel plans. If not, those foreign charges could raise a red flag and your account could be frozen.
• Always take a second card with you. This will come in handy should your primary card not be accepted for some reason.
• Make a list of the international toll-free numbers for your credit cards in case there?s a problem. And don?t keep that list in your wallet or purse.
• Many countries, including those in Europe, have switched to smart cards. Your card with a magnetic strip on the back many not work for some automated purchases, such as parking garages and train ticket kiosks. Whenever you?re about to buy something at a small merchant or restaurant ask them if they?re able to process your credit card. ConsumerMan: U.S. credit cards may not always work overseas.)

The bottom line
You probably spend a lot of time shopping for the best deal on your foreign travel purchases: hotels, trains, planes and rental cars. Don?t waste money when paying for your trip. Get a good credit card with no transaction fee and a good interest rate.?

If you have excellent credit, consider the travel credit cards that offer huge bonuses for getting and using them. (ConsumerMan: The right credit card can cut travel costs.)

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Source: http://bottomline.msnbc.msn.com/_news/2012/07/06/12598742-the-best-way-to-pay-when-youre-abroad?lite

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