New card options let travelers avoid foreign transaction fees
Cathleen McCarthy is a journalist whose articles on travel, commerce and consumer topics have appeared in dozens of publications. She writes "Cashing In," a weekly column about credit card rewards programs, for CreditCards.com
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Dear Cashing In,
taking a trip to Japan, my first trip out of the country in a long
time. I'd like to rack up some rewards on at least one of my credit cards for
this trip but I'd also like to keep fees to a minimum. I was planning to rely
on my Delta American Express and Chase Freedom cards but it looks like both
charge small foreign exchange fees. Is it really enough to worry about? -- Karen
Those foreign transaction fees can definitely add up, so it's smart to avoid them if possible. Neither of
the cards you mentioned will allow you to do that.
do they add up? Let's say you you're in Japan for a week, use your Chase Freedom
card to get cash from Tokyo ATM machines, and charge $500 per day on hotels,
meals, shopping and transportation. The 3 percent foreign transaction fee on
that card would add $105 to the $3,500 of overseas charges on your credit card
bill. With a no-fee card, you could spend that cash on sushi instead.
from experience, there's nothing more annoying than budgeting carefully for a
trip only to return home and find unexpected fees on your credit card bill for
every transaction you made. Talk about post-vacation letdown.
American Express charges a foreign transaction fee on all but a few high-annual-fee
cards, including Platinum and Centurion. Using your Delta card will mean an
extra 2.7 percent on every transaction you make outside the U.S. -- slightly better
than your Freedom card's 3 percent but not much.
foreign transaction fees are an incentive for AmEx to
attract high rollers who spend a lot overseas. That particular incentive is
becoming less special as other issuers remove those fees from more accessible cards.
Neither Capital One nor Discover charge foreign transaction fees. Chase just waived the 3
percent foreign transaction fees on yet another of its rewards cards -- but it
wasn't Freedom, it was United Explorer. Chase now has 11 cards without foreign
transaction fees -- including, as of June 1, 2013, the Explorer.
of the EMV chip cards issued by Chase charge foreign transaction fees, which makes
them more attractive to cardholders who travel overseas. Chase is positioning its
chip cards as having no foreign transaction fees, which makes me think it may
plan to remove foreign transaction fees on cards when (or before) it releases chip versions.
chip cards co-branded with Hyatt, Marriott Rewards, Ritz-Carlton and British
Airways charge no foreign transaction fees. Yet the Freedom card does and, up
until now, so did the Explorer.
guess is United Explorer, which must have a high percentage of overseas
travelers, may be preparing to release a chip card. I wouldn't be surprised if
other no-fee cards in the Chase portfolio -- Sapphire, Ink, Priority Club
Select -- announce a chip option soon.
telling what will happen on that front, but if I were you, I'd
think about adding a chip card to my wallet. Japan has migrated to EMV chip
technology, which means you could run into issues with your Freedom and Delta AmEx. If you're
going to take on a chip card, I'd find one that waives foreign transaction fees.
See related: More issuers offer credit cards with no foreign transaction fee,
9 tips for traveling with credit cards, Are chip cards necessary for charging overseas?
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Updated: August 28, 2013