Using a credit card overseas
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Recently, I learned that many credit card companies tack on an extra surcharge for using your credit card overseas. This charge is often not reported as an extra line item. Instead, it is hidden inside the cost of the purchase, and since hardly anyone bothers to check the prevailing exchange rate to figure out if they’ve been billed the right amount for each purchase, this tactic largely goes unnoticed. The surcharge, tax, or whatever your choose to call it, can be as high as 3%. For people who do a lot of travelling and make significant purchases overseas, this can be a rather high premium to pay. The good news is that there are several cards which do not charge this premium. CapitalOne is one such company, but there are others. If you’re planning to travel abroad, it’s wise to check with your credit card company to find out if they charge extra for this service, and if so, shop around for another card.
In spite of these caveats, a credit card is still the most convenient way to pay for stuff abroad. Besides the security and convenience, credit cards can also get you better value for money, since the major banks typically negotiate a better exchange rate than you would get from an ATM or a money-changer. Just be aware, and shop around.
http://money.cnn.com/2006/07/26/news/economy/cards_travel/index.htm
Credit card companies charge a certain percentage to retailers, often 3-5%, of the cost of purchases. And this is cost is factored in by retailers when selling their products to you and me. Hence the reason cash is king. Retailers are happy to take out this cost if items are purchased using cash; at least here in Australia and Asia.
As for banks negotiating better exchange rates, when was the last time banks have done us a favour? Due to hourly (if not minute)fluctuations in currency rates I have found 50% of the time the credit card companies can give you a better exchange rate and the remaining 50% of the time see a money changer.
Cash may be king still but I would rather pay more for the convenience of plastic. It’s been a long time since I used traveler’s checks. I have only two credit cards (one Amex and a Visa) and while I know how much Amex charges me for foreign transactions, I don’t know how much my Visa charges me. But I don’t really care as the benefits of using my Visa (miles on United Airlines) have far outweighed the cost of using it (I even pay an annual fee of $140 for this card and still love it). While I have never had Capital One, I hated having to shred on a daily basis their solicitations until I took my name off all marketing lists.
I’m no expert on this, but here’s a link that had some information on this very topic:
http://www.independenttraveler.com/resources/article.cfm?AID=42&category=8
And the pertinent snippet of info:
On a similar vein, ATMs often give you a better exchange rate than currency exchange bureaus and traveler’s checks. Have at least one ATM card from a bank that refunds your ATM surcharges when using overseas.