Paul Sakuma / AP
With the recent news that Bank of America had planned to impose a $5 monthly fee for debit card use, and then quickly backed down, Travel Kit wondered how travelers could make informed choices when using ATMs and credit cards.
We spoke to two experts, Henry H. Harteveldt, a travel industry analyst and co-founder of the Atmosphere Research Group, a market research company, and Tim Winship, publisher of FrequentFlier.com, a Web site and newsletter that provides information and advice for people who participate in travel reward programs.
There is good and bad news, but unfortunately no magic bullet.
Q. Is the situation that happened recently with Bank of America likely to happen to transaction fees for travelers?
Harteveldt: Banks are very competitive, so that’s why, especially in the era of social media, they can raise fees only so much. And some banks have become more aggressive by waiving or refunding fees in order to win customers.
Q. Is it better or worse for the consumer today than in the past?
Winship: It is so complex these days, there are so many flavors that it is tremendously confusing out there. What we’ve seen in the last year or so is a trend toward not waiving but discontinuing altogether foreign transaction fees. CapitalOne cards were really in the lead here, and others have followed. It’s certainly better with respect to this particular fee.
Q. What’s the most important thing consumers should do before traveling?
Harteveldt: Plan ahead. It’s important for travelers to do their homework because fees can add up. Even if your own local bank does not charge fees or waives them, it really comes down to research because if you are out of town or in another country, the other bank used for the transaction may charge fees. Before traveling, always ask your bank what their policies are for fees at ATMs, and where they have other branches in destinations you plan to visit. Also, when you travel internationally, your bank may impose a different fee or fees. A little bit of advance planning can save you some money.
Q. How can consumers avoid or lessen fees when using ATMs or credit cards?
- Avoid using non branded ATMs, (those not affiliated with banks) at places like hotels, shopping malls. The fees may be even more than what banks typically charge. And avoid taking cash advance on credit cards, due to high fees and interest that banks charge. It is better to withdraw cash from an ATM.
- Read the screen - When you get cash, read screens very carefully. If you need cash, you need cash, and banks know it, which is why they often charge high fees. So plan ahead.
- Be aware of conversion rates If you withdraw too little cash from an ATM, you will need to withdraw cash more frequently, which adds costs in transaction fees. If you withdraw too much, you will lose money when you convert the cash back into your own currency. Also, how much you pay will depend on when transactions are posted, and you can pay more for an item if you are unaware of daily conversion fluctuations.
- Have cash in the local currency before arriving at destination. Make sure you have plenty of cash, especially in less developed countries. The last thing you want is to arrive somewhere at night or on the weekend without enough cash and no access to an ATM. Sometimes ATMs may be hard to locate and transactions at hotels and other non-bank transactions may end up costing you more because you often do not get best rate. Even if you are on a tour where meals, transportation and hotel are all prepaid, it is important to have cash for tips, which are best paid in local currency. The U.S. dollar is no longer the sought after currency. Also in some countries and rural areas, credit or debit cards are not readily accepted. Consider a prepaid stored value card in local currency, which some banks provide.
- Remember that in many countries the use of embedded-chip technology is common, so the magnetic strip technology used for credit and debit cards in the United States may not work.
- Consider co-branded credit cards like Delta/American Express or United Airlines/Chase, which generally charge yearly fees but often give perks like waiving baggage fees and offering priority boarding. A family of four can save up to $100 each way on checked baggage.
Q. Are certain kinds of credit cards better than others when traveling?
Winship: Yes. Be clear what your goals are and be clear about what the actual rewards are with each type of card.
- Cash rebate credit cards allow the card holder to receive cash, which can be used to purchase a variety of goods and services, and are better for the frequent buyer than for the frequent flier. You can use them for anything. Let’s face it: Cash is king. Infrequent travelers are better off with cash in hand, and they don’t have to struggle with redeeming miles, which has gotten significantly worse in the last two to three years. It’s never been more difficult, as post recession, airlines have reduced capacity.
- Travel reward credit cards linked to specific airlines, which can only be used for travel, are ideal for frequent fliers who can accrue miles through multiple transactions and multiple types of transactions, such as flights, hotel stays and car rentals. And it is easier for frequent fliers to redeem miles; they travel so much they can typically use twice as many miles to get unrestricted tickets. It is not the best value, but allows them to get around the cap. Also, frequent fliers can take advantage of upgrades, which are a good value.
- Proprietary credit cards are reward cards that are not linked to specific airlines or hotels, so they offer greater flexibility. Examples would be the CapitalOne Venture card and the Chase Sapphire card. The main selling point is that when it comes time to redeeming miles, the program operator simply goes out and buys you a ticket. Typically there are no caps or restrictions. These cards are ideal for people who are in the middle; not frequent fliers, but who may travel more than frequent buyers. The downside is if the traveler also has a credit card linked to a particular airline and is therefore accruing points or miles with two different cards, it may take longer to redeem tickets.
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