Avoiding bank fees while traveling while traveling is something that everyone should learn how to do. Avoiding credit card fees, currency exchange fees, and foreign transaction fees while traveling overseas is important in order to save money for more trips and adventures.
In this travel tips post we are going to cover the main fees charged by banking and credit card institutions. The fees can be broken down into three types; ATM withdrawal fees, foreign conversion fees (which can also be tied into credit card fees), and exchange rate fees.
Its quite easy to avoid paying bank fees while traveling once we understand the structure of how banks charge customers for service.
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Choosing The Right Bank
One of the first things to understand is that large public banks are in business to make a profit. Smaller banks such as credit unions generally have smaller fees but they also provide less services. It is highly recommend to look at the fee structure with your bank and also consider opening an account at a smaller bank or credit union.
Credit unions are normally “not for profit” and charge much lower fees for doing business. This means that they charge less fees while traveling. At the same time large banking institutions also have their benefits. The largest banks in the world have created partnerships with each other in order to provide no fee ATM withdrawals both domestically and internationally.
As long as one is part of these banks ATM fees can be avoided.
This assumes of course that travelers will be able to find an ATM with a bank that is part of the alliance. The alliance is called the global ATM alliance. Check the fees at your local bank and look at the viability of opening an account with a credit union. Otherwise, it is recommended to have an account at one of these major banks.
- Bank of America (United States)
- Barclays (UK, Europe, several African nations)
- BNP Paribas (France & Belgium)
- BNL d’Italia (Italy)
- Deutsche Bank (Germany, Europe, India)
- China Construction Bank (China)
- Scotiabank (Canada, Caribbean, South America)
- Westpac (Australia, New Zealand, Oceania, and Asia)
- ABSA (South Africa)
- UkrSibbank (Ukraine)
Choosing a Large International Bank
Another option is to choose a banking institution that has various international entities around the world. Three of the most common are Citibank, HSBC, and Standard Charter Bank.
I have personally had a Citibank account and know many friends and families that have accounts with standard charter. I would not recommend opening an account with Citibank as their customer service is very poor and their fees are generally very high.
If opting for one of these three banks I would recommend Standard Charter Bank or HSBC.
As I have been day trading for nearly 12 years I am heavily involved in the financial markets. With the banking crises that have appeared in the last few years I looked very closely at bank financials. The last thing we want is to be part of a bank that is going to fail. Citibank was bailed out by the US government so I would not trust the decisions that they make. HSBC and Standard Chartered Bank are better options.
For US residents and citizens the best option would be a checking account with Charles Schwab. Their checking account has no minimum balance requirements, no monthly fees, and all ATM fees whether international or national are refunded at the end of every month.
Charles Schwab also will open a no fee brokerage account in addition to the checking account.
I have found the checking account with Charles Schwab to be the best option. Since they refund all fees charged by any bank travelers no longer have to worry about looking for the right ATM or bank. One can choose any bank and Charles Schwab will refund all fees associated with any ATM transactions at the end of every month.
Another reason why Charles Schwab is a great option is because of very easy wiring policy. Since I run various businesses online I often have to wire money across the world. Many large banks offer international transfers via online banking but many times this isn’t enough.
Charles Schwab allows you to fax in a wire form and leave standing instructions.
This means that once the wire form is sent in and approved one would just need to call Charles Schwab and authorize a wire transfer over the phone. This has been invaluable to me as often times wire transfers can get very complicated. Definitely a recommended option for more business related travelers.
ATM Withdrawal Fees
The fees associated with international ATM transactions vary. Some banks charge as high as five dollars in order to make a withdrawal at an international ATM. This means that every single transaction, including the balance inquiries, is a charge of up to five dollars.
When living in Ethiopia I realized that I was charged over $200 one month just in ATM withdrawal fees. At that point I didn’t have the Charles Schwab checking account and was blinded by the global ATM alliance.
Sadly, there were no partnership banks in Ethiopia.
ATM fees can add up considerably even if one is just going on a two week trip to Europe. If we assume a $2-$5 fee every time we take out money that can equal upwards of $50-$200 a month.
Foreign Transaction Fees
In addition to ATM fees there are also foreign conversion fees. Any time a bank converts a foreign currency into your home currency there is a percent fee charged for that service. The total fee is between 2% to 5%.
Avoiding this bank fee while traveling is the most important. These fees can add up to much higher than the ATM withdrawal usage fees. Companies such as Visa or MasterCard normally charge 1% of the total conversion and the bank will charge between 2% to 4%.
This means there is a possibility of being charged an ATM withdrawal fee in addition to the foreign conversion fee.
Imagine taking out $500 and being charged $2.50 to use a foreign ATM in addition to a 3% fee of $15.
Both banks and credit card companies are known for charging these fees. There are many credit cards available now with no foreign conversion fees. Below are some options:
- The Chase Sapphire Preferred (My recommendation)
- Capital One® Venture® Rewards Credit Card
- Capital One® Quicksilver® Cash Rewards Credit Card
- The BankAmericard Travel Rewards® Credit Card
Other Tips On How To Avoid Bank Fees While Traveling
Use Credit Cards with Rewards – There are many credit cards available in the market that will provide benefits such as extra miles and points. Travelers are then able to use these points and miles for free trips, upgrades, and VIP style benefits.
As banks often make money on the currency exchange many of them won’t provide the exact exchange rate offered in order to make money on withdrawal. Any of the credit cards listed above would be highly recommended as they do not charge foreign transaction fees and provide these benefits for their customers who frequently travel internationally. Many credit cards will also provide the best currency exchange rates, ensuring you get more of your money for your money.
I would recommend the Chase Sapphire preferred card since it’s a points-based system that can be transferred to a variety of companies. Most travel credit cards are company specific, meaning they can only be used for one brand of hotels, airlines, or rental car companies. With the Chase Sapphire preferred card one can transfer to a variety of companies with different services.
Plan Ahead – Most travelers plan trips ahead of time. If you know you are traveling overseas start keeping track of foreign exchange rates and start exchanging early. There are a variety of tools online that one can use to gauge the rates. Here are a few below:
Many times travelers can order foreign exchange from their local bank before leaving on their trip. I always like to have roughly $100 in local currency for emergency purposes.
Avoid Horrible Exchange Rates – Never exchange any money at airports. They provide the absolute worst exchange rate available. While emergencies do happen, by planning ahead, this can always be avoided. If in a bind, your best bet is to use an ATM machine at an airport rather than the official currency exchange desks.
If currency rates spike in your favor always try to take out more money than normal. Any debit cards or ATM cards with the Visa logo will use the of official Visa conversion rate provided in the link above. Travelers you too can use the Visa conversion rate link I have listed anytime to see the official rate that visa is offering and decided for yourself to take out more money or wait until the next day as to achieve the best rate.
Planning for Contingencies
What happens if your ATM card is stolen? Then what?
It is recommended to have either two accounts or two debit cards (similar to ATM cards) just in case this happens. Banks are often able to interlink debit cards with different accounts.
I have two checking accounts with two debit cards with Charles Schwab. If one of my debit cards are stolen or is lost I will be able to immediately pick up the extra card and connect that with my second checking account.
This allows me to proceed business as normal.
Having more than one checking account with other banks is also advised. There are very rare cases where certain banks may have issues with international withdrawals. One also has to consider that some banks are more strict than others.