No-Foreign-Fee Cards Still Best for Overseas Spending

Credit cards that don’t carry foreign transaction fees are generally the best option for spending while traveling internationally. But even if you’re stuck with a card that charges the fees, you can still save more by using the card rather than by exchanging cash at banks and airport terminals.

That was the conclusion of an analysis from Card, which compared the cost of currency exchange services from the major credit card networks with 15 large domestic banks and airport currency exchange outlets like Travelex.

Cards that don’t charge foreign exchange fees are the best bet. Card Hub says they’ll save you, on average, about 8 percent over exchanging cash at domestic banks, and 16 percent over airport exchange services. There are more cards now that come without the fees, like Chase’s Sapphire Preferred card and the Capital One Venture Rewards credit card. Roughly 82 percent of cards carry the fees, down from about 90 percent a year ago, CardHub said. Foreign transaction fees typically run from 1 to 3 percent. The average fee in the first three months of this year was 2.38 percent, the report found, down from 2.52 percent a year earlier.

Card Hub’s default list of “featured” no-fee cards may give higher placement to card issuers that pay advertising fees to the Web site. But users can make their own search by entering specific criteria, said CardHub’s founder, Odysseas Papadimitriou. The Web site NerdWallet is another source for information about cards with no foreign transaction fees.

Using cards that don’t charge the fees not only saves you money but avoids hassles, since the currency is converted automatically whenever you make a purchase, said Mr. Papadimitriou, a former card executive at Capital One.

Bill Hardekopf, chief executive of the Web site, said credit card companies are dropping the foreign fees on some cards in a bid to attract clients with solid credit, since those consumers tend to be more affluent and travel overseas. “They’re courting people with good to excellent credit more aggressively,” he said.

If you must use a card that still charges the fees, it will still save you nearly 6 percent relative to exchanging money at banks, and almost 14 percent compared with airport exchangers, the study found.

If you have to go with a bank, it pays to do some research. The best banks for currency conversion are Northern Trust and Harris Bank — the same as last year, the study found. The costliest are also the same: U.S. Bank and Fifth Third Bank. The fees that banks charge for currency conversion are, overall, unchanged from last year (Wells Fargo is an exception, according to CardHub, dropping its fee to $7 this year from $12 last year.)

On average, the analysis found, banks save consumers almost 10 percent over airport outlets like Travelex, which offer convenience but at a premium.

Mr. Papadimitriou advised consumers to avoid so-called dynamic currency conversion, which is what happens when a merchant asks you if you would like to have your purchase total converted on the spot into American dollars. Merchants generally use a high exchange rate and pocket a profit from the transaction, benefiting from tourists who don’t bother to check the math at the point of sale.

Are you planning foreign travel this summer? How are you planning to pay for purchases overseas?