Using ATM Cards/Credit Cards Abroad

Recently, a financial journalist interviewed me about the best way to make purchases and get cash abroad. I’ve traveled to Europe many times and to Italy about 20 times over the past decade. Since I visit Italy about three times a year, I have developed my own routine for how to handle money abroad — mostly relying on ATM and credit cards, but with a few important caveats.

Using ATM Cards to Get Cash

I use my ATM for the cash I need on hand and purchasing souvenirs. Travelers are usually charged $2 to $4 for making an ATM withdrawl overseas (this may be split between the ATM’s bank and the home bank). I’ve paid almost this much just taking money out in another state, so this doesn’t seem too bad. You can obviously limit these charges by taking out a chunk of money each time. Some issuing banks also charge a percentage-based currency-conversion fee. Check with your bank before you go abroad.

Credit Cards for Big Purchases, Check Fees

I use my credit card for larger purchases. American Express charges a 2% fee for charges abroad. Visa/Mastercard charges 1% for charges made abroad and the issuing bank will charge 1 to 2% over that. Some issuing banks – such as Providian — do not charge anything extra but you will still be charged 1% by Visa/Mastercard.

You can call your bank and/or credit card company to find out the fees. It is a good practice to do this before a trip abroad anyway, to let them know that you will be making charges from a foreign country (or withdrawing cash) and you may be charging more than usual. Sometimes these actions can signal fraud and the bank or company may put a hold on your account if they cannot get in touch with you to verify charges.

Sometimes Cash is King

Also, if you are making a significant purchase or buying multiple items, always ask the shop clerk if he or she will give you a small discount for paying cash. This always works for me in Italy. Shopkeepers hate paying their own fees on credit card transactions. Remember though that if you are having something shipped, it is probably best to pay for it with a credit card so you will have some recourse if the item never shows up, etc.

My Dad: Get Some Euros Before You Leave

My parents first took me to Europe when I was 10 and my dad was always sure to get some of the local currency before we stepped on the plane. Just in case… He still does this today and I do it as well. Something like the East Coast blackout is what you are preparing for…ATMs run on electricity and couldn’t be accessed. You don’t want to be stuck in a foreign country without cash or not even be able to get out of the airport because you can’t pay the taxi driver. You will pay more to exchange dollars to foreign currency in the U.S. but the peace of mind is worth it.

An Important Caveat on ATM Cards

Really be sure to check with your bank as to whether your ATM card will work abroad or not and even then have a back up plan (such as your traveling companion’s ATM card, etc.) This is especially important if you are traveling in the countryside. I experienced this firsthand while spending a week in Tuscany with a friend. She repeatedly tried to withdraw money from an ATM and was denied. She called her husband back in the States who called the bank and said she could not withdraw money because her ATM was linked to a savings account. (Not sure if it was only because it was a savings account or if it was because it was not the primary account with which the card was linked.) We stopped in San Gimignano and went inside a bank to see if she could get a cash advance on one of her credit cards. Not possible. If she didn’t have me, she would have had no way of getting cash.