When you use your credit card overseas, you will get charged a foreign transaction fee of about 1.5 to 3.0% on top of your purchase price for goods and services. Assuming you spend around $3000 on your overseas trip, you will see an additional charge of $45 to $90 on your credit card statement as foreign transaction fee cost.
How can you Avoid Foreign Transaction Fee
There are ways to prevent foreign transaction fee when you use your card overseas. Most of the premium cards from American Express, Chase, Citi Bank and Bank of America waive foreign transaction fee which will save you money when you use the card overseas to pay for your transactions.
Also, the no foreign fee transaction card waives you the fee if you purchase goods in foreign currency on a website operated in an overseas location. A few months ago I wrote an article about using my Chase Sapphire Card for booking a train trip in Europe. The Chase Sapphire card comes with no foreign transaction fee, and I used the card to book my train ticket in British Pound and found out the card indeed gives out an excellent rate for paying for the service in a foreign currency.
Using various No Foreign Transaction Fee Credit Card in London
During my recent trip to London, UK I decided to take several no foreign transaction fee card and decided to experiment them to find out the which card will give the best rate for US Dollar to British Pound when they are used for various purchases.
During my past overseas trip, I never cross-checked with the data available for the dollar to foreign currency rate for my purchases to see whether I get close to the spot exchange rate available for that day. During my recent trip to London, I tried to check out the currency exchange rate available for the day and the exchange rate; I get when I use my credit card to make a purchase.
Using Chase United Explorer Visa
Used Chase United Explorer Visa card to make a purchase for £ 37.52 and based on my Chase credit card statement I was charged $46.50 in US dollar for that transaction. Based on the amount charged in dollar the conversion rate works out to $1.2393 per British Pound.
On the day of the transaction, the pound to dollar conversion rate was $1.2356. Based on the conversion rate, I received an exchange rate that was very close to the one available on that date. So the Chase United Explorer Visa credit card gave me an excellent exchange rate when the card is used for purchases in foreign currency.
Using Barclay AAdvantage Card Mastercard
For another transaction on the same day, I paid using the Barclay AAdvantage Card to pay for my services. I used my card to charge £11.45 for the service as per Barclay AAdvantage website the charge for the services was $14.17 with a conversion rate of $1.2375 per British Pound.
The conversion rate per Bloomberg on the day was $1.2356 for a British Pound. Based on the transaction I received an excellent exchange rate available for that day when I used the Barclay AAdvantage Mastercard.
You may notice there is a slight difference between the Chase United Explorer rate and Barclay AAdvantage rate, with Barclay AAdvantage card giving a slightly better rate than the Chase United Explorer card. The rate difference could be due to foreign currency market changing rapidly throughout the day a closing the day with the closing price of $1.2375 per British Pound.
Using Bank of America Alaska Air Visa Card
Used my Bank of America Alaska Airlines Visa card on a different day to make a purchase for £36, based on my account website I was charged $44.28 for the transaction, the conversion rate for the transaction works out to $1.23 for a British Pound.
The Bloomberg end of the exchange rate for a dollar to pound on that day was $1.2282 for a British Pound. Based on that Bloomberg closing exchange rate I received a conversion rate close to the exchange rate available for that date.
Experiment Using American Express SPG card
Used American Express SGP card for a ticket purchase at the cost of £49.90, as per my credit card account, I was charged $61.72 for the ticket price. Based on the dollar charged to my account the conversion rate between US Dollar and British Pound works out to $1.2360 per British Pound.
Based on the exchange rate of $1.2252 per British Pound, for the using American Express SGP card, the American Express SGP card is slight giving a poor exchange rate when we used the card to make the purchase compared to the other card I used for purchases.
Both VISA and Master Card branded cards gave a rate very close to the exchange rate available for that day. The American Express card also offered a good rate but not as good a rate of Visa or MasterCard. So using a Visa or Mastercard will give you the best foreign currency exchange rate when you use your card to pay for a service in foreign currency. No matter what version of the card you use, if you use no foreign fee credit card you save a good amount of money from getting wasted as the foreign transaction fee.