Ed Perkins on Travel
9:30 AM EDT, September 30, 2013
When you travel, you want your money to be available and secure -- without wasting or losing any of it. These days, the answer to most travel money questions, is, to channel that famous line from The Graduate, "plastic." Around the corner or around the world, plastic can handle almost all of your money needs.
If you rent a car, the biggest advantage by far is the collision damage coverage many cards now provide. That's worth up to $30 a day. The best protection is primary, available on all Diners Club cards, a very few MasterCard and Visa cards, and all American Express cards as an extra-cost option.
Outside the United States, credit cards are generally your best bet to minimize exchange losses. The top cards -- Capital One and some premium MasterCard, Visa and AmEx cards -- add no exchange surcharge at all: Your bill, in foreign currency, is converted to dollars at wholesale rates. Several other cards -- especially from smaller banks and credit unions -- charge only 1 percent for conversion. And even with the 3 percent fee most other cards add, you lose less than if you convert dollar currency. At foreign exchange offices, after the bad conversion rate and various fees, you typically lose somewhere between 5 percent and 15 percent. As to travelers' checks, as your granddaughter might say, "That's so 20th century." You lose about the same amount you lose with currency, and from what I hear, many foreign banks and hotels are no longer even willing to cash them.
Most debit cards are also branded MasterCard or Visa, so you can use them to make purchases. But you still typically pay the same conversion fees, and debit cards lack the many buyer protections available through credit cards.
DEBIT CARDS FOR CURRENCY. You can't put everything on a credit card; you always need some local cash. Here your best bet is a debit card. If your regular bank has branches around the country, you can withdraw currency from your bank's ATMs anywhere without any added fees. But if you have to use some other bank's ATM, your bank typically charges around $3 per withdrawal, regardless of the amount, and a few charge more. And some other banks' ATMs -- and especially those stand-alone ATMs you see in various retail locations -- add their own withdrawal fee, so you can wind up paying as much as $5 each time you get cash. Obviously, don't make a lot of small withdrawals.
To avoid losing anything, open a new account. Some smaller banks and credit cards do not add any fee for withdrawals from other banks, and a few agree to absorb other banks' fees. Even if you intend to keep your present bank for the long haul, the best way to avoid fees is to open a travel account with some no-fee bank.
Outside the United States, debit cards remain your best source of currency, but you find a bigger variance in fees and charges than with credit cards. Some banks add just the $3 or so fee per withdrawal, some add the 3 percent conversion fee, and a very few add both; check your bank for details. A good option is an account with Bank of America, which belongs to the Global ATM alliance among banks that add neither withdrawal nor conversion fees from ATMs operated by a member bank. Current members include large banks in Britain, Canada, China, France, Germany, Mexico and the South Pacific. Some smaller U.S. banks also offer no fee foreign withdrawals.
Prepaid debit cards, often touted for foreign travel, avoid losses from a stolen card but generally have big withdrawal and conversion fees. And don't use a credit card for cash -- you generally have to pay interest as well as the usual fees.
(Send e-mail to Ed Perkins at eperkins(at)mind.net. Perkins' new book for small business and independent professionals, "Business Travel When It's Your Money," is now available through http://www.mybusinesstravel.com or http://www.amazon.com)
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