Best Cards Abroad

While you are carefully planning your itinerary for a trip overseas, you should also pay close attention to which credit and debit cards you're taking. Otherwise, you could be in for some unpleasant surprises on your statements when you return. That's because more and more institutions impose currency-conversion fees on credit-card charges and ATM withdrawals abroad.

It's common today to find a 3% foreign-currency-conversion fee added to each credit-card purchase you make in another country. That includes the 1% fee that Visa and MasterCard impose on the issuer when they translate your expenditures into dollars, which generally is passed on to you.

American Express charges its cardholders a 2% fee. Brokerages such as Merrill Lynch and UBS also impose a 2% conversion fee (although UBS waives the fee for its Select Level accountholders). Charles Schwab merely passes on Visa's 1% surcharge.

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HSBC and Providian banks do not add an additional fee on top of Visa and MasterCard's 1% charge. Credit unions, such as the Pentagon Federal Credit Union, also often require members to pay the 1% fee but add no other surcharge. Of the major credit-card issuers, Capital One is alone in neither adding a surcharge when you flash its plastic nor passing on the Visa/MasterCard fee.

A growing number of hotels, car-rental companies and other retailers overseas will offer to convert your purchase into dollars immediately. Be wary of this offer, though, because the exchange rate the merchant employs may not be as good as the wholesale rate MasterCard and Visa use. In addition, the merchant may add its own "dynamic currency conversion fee" to the bill. Visa requires that its participating vendors let you select the currency you prefer and disclose any added fees.

If a transaction from another country comes through in dollars, some banks, including Bank of America, do not impose the 3% conversion fee it would otherwise add to an overseas purchase.

While you are traveling, you will need some local currency for small purchases. But obtaining it through a credit-card cash advance is not a good idea. Cash advances almost always incur fees, and interest charges begin the day you receive the funds. It makes more sense to use an ATM for local currency.

Most banks tack on a fee if you use an ATM that is not part of its network, so you could end up paying $5 or more in fees to your own bank and the bank where you get the cash. There are ways to avoid those outlays, however. Bank of America normally charges $5 per withdrawal, but it waives the fee if accountholders use one of the more than 12,000 ATMs operated by a member of its Global ATM Alliance. HSBC has branches in 77 countries where accountholders can obtain cash without paying a fee. Citibank has branches in 50 countries where accountholders can withdraw funds surcharge-fee. Washington Mutual's new WaMu Free Checking account offers free ATM withdrawals anywhere in the world.

Regional banks are often customer-friendly. For example, Commerce Bank, which has branches in the Mid Atlantic region, not only does not impose an ATM fee itself, it also rebates any fees other banks impose if you maintain a $2,500 balance in your account. Internet-only banks often rebate ATM fees for their customers, too.

*Global Alliance includes Barclays, BNP Paribas, Deutsche Bank, Scotiabank, Westpac, Santander Serfin.