Credit Cards

Think Twice Before Swiping Your Credit Card At An Overseas Location

Shopping, dining and holidaying in overseas locations has certainly been made a lot easier and hassle free with credit cards, but if you think that your credit card company is doing social service, then you are hugely mistaken. You may not be aware but the truth is that credit card companies make quite a lot of money every time you swipe your credit card at an overseas location. What they do is that they charge you extra for every overseas transaction made on your credit card, usually in the name of foreign-exchange (forex) loading.  This certainly sounds quite innocuous, but the truth is that it can easily inflate your credit card bills by a substantial amount.

If you use your credit card at an overseas location, you could also be charged extra in the name of “dynamic currency-conversion fee”. For example, if after having your lunch or dinner at a restaurant, the waiter asks you whether you would like to complete the transaction in pound sterling, you can be sure that you will be charged extra in the name of “dynamic currency-conversion fee”. When you give your nod to the waiter, what happens is that you are charged at a more profitable forex rate, something that adds around 4 percent to your credit card bill. So, when you come back home, don’t be surprised when you find that your lunches and dinners have cost you a lot more than expected.

The charges are even more when you withdraw cash from your credit card at an overseas location. When you do so, your overall charges include both a transaction processing fee and interest that you are required to pay on the cash withdrawn. To avoid these charges, you may have planned to use your debit card provided with your savings account, but what you are probably not aware is that this also won’t help much because you will still be required to pay the forex loading charges. You certainly won’t be charged interest on overseas debit card cash withdrawals, but since the transaction charges are more or less the same, using your debit card will only offer limited benefits.

So, how do you avoid this type of overcharging by credit card companies? Well, the best remedy would be that you limit your credit card usage when overseas. However, since this is often not possible, I would recommend that you opt for a credit card that does not charge you in the name of forex loading and dynamic currency-conversion fees. Spend some time on reading the fine print and comparing available credit card schemes and soon you will be able to select a credit card thats best for overseas transactions.