When planning a trip, most Americans account for major expenses such as gas, airfare and lodging. These types of purchases take the biggest chunk out of most travel budgets and require careful consideration. However, too many travelers find themselves caught off guard by the smaller, inconspicuous foreign transaction fees and ATM fees charged by banks. When traveling out of state or overseas, the simple act of withdrawing money, or even paying by debit card, may cost you.
Getting free cash from an ATM is an experience bank customers often take for granted, especially in the United States. Most banks have their own domestic ATM network for their customers to use free of charge. Customers who need to withdraw money from a different ATM may pay a few extra dollars for the convenience.
The average cost for domestic out-of-network ATM use, for banks and credit unions of all sizes, is $1.78. The majority of bank customers can expect higher fees. America's 20 biggest banks charge $2 to $3 for domestic out-of-network ATM access. Customers using foreign ATMs can expect to pay even more. Most banks charge a higher out-of-network fee for foreign ATMs, as much as $5, plus a foreign transaction fee of 1 to 3 percent.
Depending on your destination, bank summer travel fees may be impossible to avoid, but they're easy to minimize by choosing the right financial products.
Pay with credit or debit cards. Both credit cards and debit cards provide a convenient way for travelers to pay for purchases overseas. While not accepted everywhere, credit cards are one of the safest ways to pay for foreign purchases, since they provide the most safeguards against fraud. If a credit card is lost or stolen, the cardholder is not responsible for more than $50 worth of purchases. Many bank customers prefer to use debit cards to avoid incurring debt, but when it comes to avoiding fees, their choice may not make a difference. Both credit cards and debit cards charge transaction fees for foreign purchases – usually 1 to 3 percent of the total purchase price.
For travelers that make the majority of their purchases with plastic, these small fees can add up quickly. However, transaction fees vary greatly by institution. For debit cards, foreign transaction fees are nearly ubiquitous, and most of the biggest banks in the country charge 3 percent for each purchase. Some smaller banks and credit unions only charge 1 percent. TD Bank, Charles Schwab and Capital One 360 are some of the few banks that don't charge any foreign transaction fees.
Open a checking account. Frequent travelers may want to consider opening a checking account with a bank that refunds ATM fees. Some online checking accounts, like the Capital One 360 Checking account, don't charge for out-of-network ATM use, although customers may incur fees from a third party. Charles Schwab's High-Yield Investor Checking account refunds all ATM fees domestically and internationally, even those charged by a third party. Big bank customers may also find some relief by checking to see if their bank is part of an extended network. For example, Bank of America is a member of the Global ATM Alliance, which allows customers to withdraw from ATMs at participating foreign banks like Barclays and Deutsche Bank.
Sign up for a travel rewards card. To avoid foreign transaction fees, frequent travelers may want to consider signing up for a travel rewards credit card with no foreign transaction fee. Some of the best travel credit cards come with an annual fee, but for frequent travelers, the perks make them worthwhile. Capital One Venture, BankAmericard Travel Rewards and Chase Sapphire Preferred are just some of the credit cards that don't charge foreign transaction fees.
Plan ahead. The best way to avoid bank fees on your next vacation is to plan ahead. Checking account and credit card terms and conditions should list the fees that customers can expect at home and abroad. If you don't like what you see, it's probably time to look for a better deal.
Laura Edgar is a senior writer for NerdWallet, a website that helps consumers find the best online checking account and other financial products.