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Best International Credit Card

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This Thanksgiving, my wife and I will be heading to London, England, to visit good friends of ours who are working there. Given the recent economic unrest, it seems pretty foolish for us to try to play any games involving exchanging money so we’ll try to convert as little as possible directly, instead we’ll resort to using credit cards as much as possible so we orphan (leave in pounds sterling) as little cash as necessary.

When it comes to using credit cards abroad though, it’s gotten a little more complicated than your classic “foreign transaction fees.” It turns out that in addition to the issuers and banks charging you a fee, some merchants will add a “Dynamic Currency Conversion” fee on top of everything else. That can be as high as five percent!

International Card Use Fees

After a little research, here are the three fees as best as I can decipher them:

Card Issuer Foreign Currency Conversion Fee (%) Issuer Fee (%) Dynamic Currency Conversion (%) Total Fee (%)
American Express 2% 0% 0% 2%
Bank of America 1% 2% 0-5% 3-8%
Bank One 1% 2% 0-5% 3-8%
Capital One 1% -1% 0% 0%
Chase 1% 2% 0-5% 3-8%
Discover 0% 0% 0% 0%
First USA 1% 0% 0-5% 1-6%
MBNA 1% 2% 0-5% 3-8%
Providian 1% 1% 0-6% 2-8%
US Bank 1% 2% 0-5% 3-8%

  • Foreign Transaction Fee: The foreign transaction fee refers to the fee that is charged by the payment processor (Visa, Mastercard, etc.) to handle the foreign exchange.
  • Issuer Fee: The issuer fee refers to the fee that the bank charges to handle the transaction.
  • Dynamic Currency Conversion: That’s the fee charged by the merchant for the acceptance of your card. This fee often times covers the transaction fees levied by international payment processors.

Example Use Case

Let’s say we have and Bank of America credit card and we go buy something at a pub in London. When we pay our tab, there are potentially three fees levied on top of our bill for goods and services. First, Visa, the card issuer, will charge us a 1% fee for handling the transaction. Then, Bank of America will want a piece of the action and charge their own 2% fee. Finally, the pub, in trying to recoup its own costs, tacks on a dynamic currency conversion fee on top of everything of 5% (let’s just say). That means your bill started at $20 USD and suddenly became $21.60 after fees, or 8% more.

Best International Card: A Capital One

The two best choices for international spending appears to be a Discover Card or a Capital One card. One interesting thing I’ve learned, again in doing research, is that Discover card, because it’s such a smaller network compared to Visa and Mastercard, simply isn’t widely accepted. It’s not as widely accepted here in the US either, so that’s not surprising (and why we can’t recommend it as a best credit card).

If you’ve done a lot of international travel and have any recommendations, we’re all ears!

Big Ben here we come!

{ 56 comments, please add your thoughts now! }

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56 Responses to “Best International Credit Card”

  1. Ken says:

    The Capital One card is great for international travel. I just used it last month.

    Much better then AMEX, since a lot of places overseas don’t always take it. Most places take VISA and MC.

  2. CK says:

    I used a Capitol One card for a trip to Italy. It worked great and it was nice to have my trip purchases neatly segregated for review. I called them before I left to insure they didn’t cut off the card when they started seeing purchases from overseas.

    Before you go overseas I would make sure you scan the contents of your wallet, passport, and any other travel docs and send it as an attachment to yourself at one of the big online email places. (gmail, yahoo, hotmail)

    • Jeb says:

      “Before you go overseas I would make sure you scan the contents of your wallet, passport, and any other travel docs and send it as an attachment to yourself at one of the big online email places. (gmail, yahoo, hotmail)”

      That sounds like the worst Idea I’ve ever heard in my entire life. You must have been a 8 times victim of Identity theft..

      • Christine says:

        AGREED!!!!! NEVER email your personal information!!!

        • Harry T says:

          Having personal information in your email account can be made safer by ‘encoding’ e.g. adding your postal code to the personal numbers (credit-card or passport) and then email to oneself for safe-keeping. That way only the owner can get the coded information back.

  3. Eric N. says:

    Jim…this is a really timely post! I’m traveling to Australia next year and have been digging up a lot of information about this. I haven’t applied for the CapOne card yet but I’m eyeing the one you chose too. Too bad my Discover card isn’t usable but any fee-free card is fine with me!

  4. Garrett says:

    If you plan on taking out cash a lot, sign up for a Capitalone MoneyMarket savings account too, and get the ATM card. No fees abroad and you won’t need to carry so much cash.

  5. tom sundermeier says:

    i don’t get it. I thought you said Discover was a good card for international use. You don’t say why though, only that it is not accepted very many places. Seems like it would suck to use internationally.

    • Maiada Moussa says:

      I saw this article it helped me alot. Am from Egypt so i go there alot so this is my first credit card. I called American Express they are expensive didnt approve me anyway. Then I called Discover and was notified they are NOT AN INTERNATIONAL CARD. And lastly I called Capital One and I was approved. Thank god. Every dollar I spend I get 5 points for at gas stations and bla bla bla and one point for anything else.

  6. jim says:

    I should amend it to say that, based on fees alone, it appears Discover and Capital One are the best options. Upon further examination, it appeared that Discover was less than ideal and Capital One was the clear winner between the two.

  7. Kevin says:

    Math Geek Alert!

    8% of $20 would make the bill 21.60, which I think is what you intended (1% + 2% + 5% is 8%). $20.80 is only 4% more than $20.

  8. jim says:

    Whoops, you’re right! Thanks Kevin!

  9. Scott says:

    From my recent business travel to Japan, 2% seems low for the fees AMEX charges. I thought they were supposed to be one of the better international cards but from comparing my statement to what my employer is reimbursing me for (based on daily exchange rates) I think I’m really paying somewhere closer to 4-5%. Although, maybe I’m just getting hosed by my employer’s exchange rate or AMEX’s exchange rate (or both!).

    I’ve heard Capital One is the best from just about everyone who’s traveled extensively abroad.

  10. efficacyman says:

    I don’t know how widespread this is, but Capitol One just recently sent my wife (who has no hassle cash rewards cards) a change in terms which ups the foreign conversion fee to 3% of any transaction. In addition, Capitol One will only lend to Prime Customers with a mortgage (in which case you will get a decent credit limit) or subprime (which my wife fell into due to lack of credit history at application) where you will likely get a $500 credit limit. Cap One will also pull all three credit reporting agencies, so it will ding your credit score considerably.

  11. Sam says:

    PenFed Credit Card.

    Charges 1% on foreign transactions.
    Has 1.25% cashback.

    So you basically end up with 0.25% cashback from foreign transactions. Sounds like a win-win here…

  12. Sheila says:

    At some point you will need cash. Check with your bank to see if they have any International Partner agreements. I have a BofA checking account (awful, but that is another story) and was able to withdraw Pounds at Barclays without an additional ATM fee when I was in London last year.

  13. Tim says:

    Not all credit cards by the same issuer are created equally as well. So, look at your terms and conditions.

    USAA only charges the 1% v/mc transaction cost, plus they have cash back, so you aren’t losing anything.

  14. Gypsie says:

    I am a DiscoverCard holder and I love it. I have also done quite a bit of international travel. Most recently I was in Thailand and used my discover card with no issues whatsoever. I was also previously stationed in Germany where i had no problems with my discovercard. I have been to Thailand, China, Germany, Italy, France, England, Holland, Belguim, Costa Rica, Honduras, Belize, Turkey, Luxembourg, Austria, Italy, Tiawan, Mexico and Belize.

    Also, I once had an issue with my discover card information once getting stolen (even though i still had the card in my posession) and as soon as i called them, it was taken care of. They removed the charges that i didnt make, reversed the additional fees that had been levied since the unauthorized user pushed my card over the limit, and opened an investigation. Once the investigation was complete ( which was finished prior to their 90 day prediction), i got a letter and havent had an issue since. And everytime I have asked to lower my interest rate, they have complied.

    What can i say, they are my favorite credit card (and the cashback doesnt hurt either).

  15. Sarab says:

    I HAVE NEVER HEARD OF THE Dynamic Currency Conversion Fee. Where did you come up with that fee and where did you get your info?

    Capital One uses the same networks as Citibank for example (i.e. Visa and MasterCard) so why would the fees be different since this fee is at the merchant level??

  16. jim says:

    Here’s the Wikipedia page on the Dynamic currency conversion fee.

  17. Sarab says:

    This supports my point that this fee is charged at the network level (i.e. VISA, MasterCard, etc) and NOT at the issuer level.

    Also where did you get these fees by issuer?

    • retireandgo says:

      Sarab,
      I have been using the CapitalOne card for all of my foreign trips, even to Canada, because they “eat” the fee that VISA charges them. Therefore you will get NO “foreign-transaction fee” on your credit card bill, as you will get with the other cards.
      The ONLY problem and it is with ALL American-issued cards, is we are still in the dark ages, as Europe and elsewhere switch to a “chip-and-pin” system.

  18. jim says:

    I searched online for the fee percentages. My chart confirms your point though, the issuer fee is simply one column. It doesn’t matter to me who charges it, I just want to know how to minimize it.

  19. Sarab says:

    All I am saying is that Capital One having 0% DCC seems wrong and unsubstantiated. Same goes for Providian for being all the way up to 6%.

    Also from wikipedia it seems that you either gets charged the issuer fee or the DCC — NOT both!

  20. Alex says:

    Does anybody has expirience with Schwab Bank ATM and Credit card?
    It looks like they have no foreign transaction fee + 2% cash back on credit card transactions.
    http://www.schwab.com/public/schwab/banking_lending/credit_card/credit_card_faq.html?cmsid=P-2874625&lvl1=banking_lending&lvl2=credit_card&

    • jim says:

      Alex: Thanks for sharing that card, I don’t personally have experience with it (it seems very new) but it’s a very attractive offer.

  21. Karen says:

    As of 2/2009 Capital One states in their customer agreement/Transactions Made in Foreign Currencies -
    “We do not currently adjust the currency exchange rate or charge any additional currency conversion fees.”

    I don’t know if the issuer fees are still -1%, but if they are wouldn’t that make the total fee -1%? :-)

  22. Jeff says:

    Yes Capital One is great for the 0% fee, but this doesn’t matter if you can’t use an American-issued credit card!!
    When we were in Scandinavia in 2007, and also in countries in western and eastern Europe for 4 months in 2008, we had many instances where our card could not be used.
    Why? Europe is changing to the PIN system. NOT for cash advances, as with American cards, but for purchases. Their VISA and MasterCard cards have that little gold square on them, which contains some information, and those are the only cards that an increasing number of merchants will take. And yet, again, the US falls behind. Even Mexico is now issuing those cards which they call “International” cards.

  23. Ken M says:

    Jeff,

    Yes, these are called smart cards. I wish they would use them in the US.

    I had the same unfortunate experience as well.

    Ken

  24. Liz says:

    Jim did you check on the schwab bank invest first platinum plus visa card that Alex mentioned? I am a student going to Europe and am looking for the best card .
    Liz

  25. Jeff says:

    I want to confirm Jim’s findings about CapitalOne. We ONLY use that card for purchases when overseas (including Canada and Mexico, because the others charge a minimum of 1% as a foreign-transaction fee), BUT I want to mention again that because Europe is changing to the “Smart card” (as Ken noted, above), even the CapitalOne card may not work. But it is still the best bet if you want to avoid the extra fees. (Don’t forget to take a debit card and a back-up credit card – kept hidden). You will DEFINITELY need the debit card tied to your checking account.


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