Should you be using Debit Card Abroad or for that matter, Credit card, overseas? If you’re, then prepare for the situation when you can get slammed with huge charges.
When you are abroad, it is a given that you will at some point withdraw cash in the local currency from a local ATM machine. Because “Cash is still the King,” especially in the developing economies. Even in the developed countries like Japan, Cash is still the King. It is an altogether different story in the US and Europe but there are places where you will prefer paying in cash. Because there are so many charges associated with using the debit card abroad or your credit card. You never know when the need for cash will come up, so it pays to be prepared by having to carry your forex in a Travel prepaid card so that you won’t have the exorbitant fees.
So here are 7 ways you can save money when using Debit Card abroad:
1. Don’t Use a Credit Card
The allure of accumulating points on your credit card is always high because you either get the yearly fees waived off or get some exclusive benefits like free lounge access. We always advise our customers to not use their debit cards abroad because of the charges. You will have to pay such exorbitant charges that you would rather wait outside the airport for hours than get that free access to the airport lounges. You should take your credit card along just for emergencies. Some banks offer travel cards with rewards with no foreign transaction fee but you will still have to pay a large cash advance fee. There are usually 3 charges when using your credit card overseas which are:
—The conversion fee of foreign currency –
This fee is the one that is charged by the Master Card or Visa because you have an Indian card, and the balance of your card is reflected in the Indian currency. When you use that card overseas, you are charged according to that country’s currency where you are currently present. When the conversion takes place from INR to that currency, Master Card and Visa charge you with a 1 to 2 percent fee in foreign country exchange. Anything above it is taken by the bank as a margin of profit.
—Charge of the foreign transaction –
This charge is the one that is put on you by the credit/debit card provider due to the transaction that you made in the foreign country. Your credit/debit card is made in a way that works only in the country’s currency in which it has been issued. When you go overseas and use the card to withdraw cash or shop, your bank is going to charge you for that foreign transaction. This forms about 2.5 to 3.5 percent of the entire transaction amount
—Withdrawal fee/Cash advance –
When you withdraw cash using a credit card, you are charged with a cash advance fee regardless of using it overseas or in India. However, when the card is used abroad, the fee is going to be higher compared to when used in India. You will have to pay a withdrawal fee when using your debit card to withdraw money out of ATMs abroad. This fee is the one which your bank agrees to pay to the bank whose ATM’s help you took to take out cash because they permitted the use of their ATMs. You are going to be subjected to a 1 to 4 percent additional fee whenever you withdraw cash overseas.
But it gets worse: There’s no grace period on cash advances, so you’ll be incurring interest charges from the day of the withdrawal, usually at a rate that’s even higher than the purchase rate.
2. Understand How Debit Card ATM Fees Work
When you use your Debit Card overseas there are three ways you could be charged.
1: Your bank could charge you a fee for using an out-of-network ATM.
2: The bank that owns the ATM will charge you an additional fee for using their ATM
3: You can have a foreign transaction fee charge, just as with a credit card. Make sure you assess whether a given ATM will incur these fees before you withdraw money.
3. Take A Forex Card along or Look for a Debit Card That Has No Overseas Withdrawal Fees
The best way to save yourself from all these charges and fees is to take your Forex on a Forex Card. You won’t get any charges because your Forex Card will work just like a local debit card. You can also take along a Debit card that will not charge you for withdrawing money overseas, however, there are other charges like Double Currency Conversions and Foreign transaction fees.
The USPs of a Forex Card purchased from BookMyForex:
4. Use a Debit Card or Forex Card That’s Part of a Large Network
To avoid the overseas cash withdrawal fee, use a debit card that is part of a large network. Like ATM of a Global ATM alliance Bank or the Allpoint network which includes 55,000 ATMs in the US, Canada, the UK, Puerto Rico, Australia, and Mexico. Research online to find out whether your bank is part of a large any large network like EEA or Global ATM alliance so that you may save yourself these charges. However, you will still have a foreign transaction fee charge sometimes. The best thing you can do is take a BookMyForex Visa or MasterCard Forex Card and stop worrying about any ATM charges or foreign transaction fees.
5. Ask for a Bank Account That Reimburses You for ATM Fees
Many Banks offer accounts that have reimbursements for ATM fees charged by other banks. Some of these banks put a limit like a maximum of 10 USD but at least you will get some money back.
6. Be aware of Foreign Transaction Fees
Always withdraw money in smaller amounts if there is a foreign transaction fee in percentages. If it is a flat fee say a 3 USD ATM fee, then you can take out large amounts of cash.
7. Avoid Changing Money and withdrawing cash at an Airport
There is always one place where you are guaranteed to get the worst ever forex rates and high charges—Airports. Never ever exchange money at an airport unless you like to throw away your hard-earned money. However, there are some ATMs at airports like JFK and Heathrow which don’t charge you anything for withdrawing cash.
Other Tips for Saving Money on Currency Conversion
Never underestimate the power of the US dollar —
US Dollar is the most popular currency in the world. Because of its popularity, there is always a high demand for US Dollar in foreign countries. In places like Thailand, local merchants at smaller stores and in large bazaars prefer USD over their own currency. The local currency is the best way to pay anywhere but you may get better exchange rates when using the US Dollar. However, some hotel operators and other large companies impose their own exchange rates, which are very unfavourable.
Be extremely careful to pay in the local currency —
Dynamic Currency Conversion, or DCC, is a popular scam with merchants and credit card processors. Supposedly, this “service” offers you the opportunity to pay in your local currency, but it really just adds a huge commission. In theory, you have to agree to this “service”. But merchant’s incentive is to earn a commission and on the pretext of language barriers, they don’t ask you. They simply dupe many travellers into accepting these charges.
Always contact your bank before you go —
Before you travel abroad and if your plan is to use your own debit or credit card, always notify your bank in advance. Because using card overseas without notifying your bank can trigger a fraud alert. In such a situation, your bank will block your account. Paying extra fees for an ATM withdrawal pales in comparison to the nightmare of your card payment declining overseas. It is important that before you leave, inform your bank of your travel plans and itinerary.
Bottom Line of Using Debit Card Abroad
It is fulfilling and rewarding to earn valuable points or miles by using your credit card abroad. There is always a time and a place to earn all these miles and bonus points. But withdrawing money using your credit card abroad is not one of them. You should always understand the charges and surcharges on your debit and credit card before you leave. But it is highly advisable to take your forex in a prepaid travel card. There are plenty of benefits and hardly any negative features. Your overseas journey should be about you enjoying, relaxing or doing your business. Don’t make it anything else by choosing the wrong way to carry forex abroad.