GaiaGeek

Credit cards can be a great asset when traveling because they save you from having to carry large amounts of cash. The catch is that not all credit cards are equal when it comes to paying by plastic while traveling in foreign countries. When you make a credit card purchase that isn’t in your card’s native currency, your card issuer may charge a currency conversion fee in addition to the original amount - sometimes as much as 3% of the transaction. You won’t ever see this fee, because it’s added in as part of the conversion from the foreign currency, but that’s just to hide the fact that you’re having to pay it. Credit card companies being sneaky? Imagine that. Fortunately, if you know which card to use and how to pay, you can avoid this hidden fee.

In general, any Visa or MasterCard issued by Bank of America, Chase, BankOne, FirstUSA, Citibank, HSBC, U.S. Bank or Wells Fargo will include the mentioned 3% transaction fee with every purchase. 1% of this charged by Visa or MasterCard, 2% by the issuing bank. American Express is slightly better, tacking on 2% for personal cards and 2.5% for corporate cards - unless it’s an American Express card issued by Bank of America, in which case it’s 1%. Discover Card charges no fee, but they’re only accepted in North America, Central America and China (and even in those areas, they aren’t accepted in as many places as Visa or MasterCard).

How do you know what your bank is charging for currency conversions? Obviously it’s best to ask them yourself, especially if you’re using a local credit union, but for the bigger banks you can check the tables on Flyerguide.com’s Wiki page on Foreign Exchange.

Fortunately, one bank is clearly the winner when it comes to making purchases abroad: All Capital One credit cards have a 0% currency conversion fee. Not only does Capital One skip the 2% that most the other big banks are charging, but they actually cover the 1% that Visa or MasterCard charges to give you that 0% currency conversion rate. (Now that is what I call service.) Add to that the fact that you can apply for a card which gets you points, miles or 1% cash back and it’s pretty obvious that you should be using a Capital One card for any of your foreign purchases. If you go with the cash back card, this would mean that for every $1000 you spend in foreign countries, you earn $10 with Capital One instead of paying $30 with most other credit cards for a total savings of $40 for every $1000 you spend.

The only other credit card which stands out is the HSBC Premier World MasterCard, but it may be difficult to get since their website states it is “exclusively for HSBC Premier clients”. It does have a miles-based rewards program, but given that you have option for miles rewards or 1% cash back with Capital One, I’d say they’re the top choice.