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Here's the simple rule you need to know when using a foreign ATM (transferwise.com)
113 points by syc on Nov 2, 2012 | hide | past | web | favorite | 52 comments

Ah yes, DCC.

On the positive, it lets you know (probably) how much you're going to spend, in your own currency. I say 'probably' because you might get hit by fees from your own bank for using an overseas ATM as well. But it's not free.

So you could look upon it as being offered a paid service, and IMHO it shouldn't be used without the customer being made aware of this.

The reason you will be asked if you'd like to pay in your currency is not really anything to do with your convenience though, it's about who gets to do the conversion and who gets to pocket the (inevitable) fees. With DCC the merchant and their (acquiring) bank get to take the fees and set the rates. Without this, your (issuing) bank does. At some point one of the acquiring banks realised that they get to see the transaction before it gets back to the issuing bank, and so they have the power to do this stuff, so DCC was born.

--EDIT-- I should say it's possible, however unlikely, that DCC could turn out cheaper. The article does give a great reason why this is unlikely though - if there's one set of people more eager to screw you over than your own bank, it's someone else's bank.

> you might get hit by fees from your own bank for using an overseas ATM as well

Check with your bank before you travel. I'm with Citibank, and they have a bunch of packages that they can enable on your account for free that remove foreign transaction fees (e.g., if you're a student; if you have more than 50k in cash; if you have a mortgage with them; etc.).

But, it being a bank, it's not like they're going to enable that stuff unless you ask for it first, and don't even think about getting it waived when you get back...

The best bank for this is Capital One. We signed up for cards (both debit and CC) for our overseas travel only. We haven't had them charge us a single time to date.

There's an even simpler rule: The more convenient currency conversion is, the more you are getting ripped off.

>There's an even simpler rule: The more convenient currency conversion is, the more you are getting ripped off.

That simply isn't true in my experience. For years, I used a debit card from Nationwide in the UK to withdraw currency all over the world. They used the VISA wholesale rate with no vig added on top and no fees for ATM use. In total, I withdrew probably over ten thousand dollars on that card, and it was one of the most convenient currency conversion systems I have ever used. (The card now carries fees for the service).

On the other hand, going to a high street bureau de change would have been much, much less convenient and would have secured me a worse rate in every case. Traveler's cheques would have been both inordinately expensive and hideously inconvenient. In fact, in the absence of a local bank account in each country I visited, I'm still not aware of cheaper way to convert currency than the system I used.

If you travel a lot and can find a bank or credit union that won't charge you any fees, hidden or otherwise, you get great convenience and an excellent price.

> For years, I used a debit card from Nationwide in the UK to withdraw currency all over the world

Yep, you and thousands of others. Unfortunately expats ruined it for everyone else, simply using it as a way to draw money from their UK accounts when retired in Spain or wherever, never giving a penny to Nationwide. They probably made a loss on each of these customers so they withdrew the service.

They really just charged the Visa wholesale rate for ATM withdrawals and purchases abroad with no fees or markup or anything. It was fantastic.

You should check if your bank is in the Global ATM Alliance (http://en.wikipedia.org/wiki/Global_ATM_Alliance).

If I withdraw money from a Barclays ATM in London (or Deutsche Bank in Berlin, etc) using my BofA ATM card, I don't seem to have an extra charges.

This is true. It led to some bizarre situations though: my partner, wanting to transfer money from her American BofA account to her British Barclays one, would've had to pay a fee to do so directly. But walking two paces to the ATM machine, taking the money out as cash, and then depositing the cash and you can avoid fees. Always seemed weird to me.

Metro Bank charge the wholesale rate with no fees. And one either UK bank I forget which. You can open a no fee Metro Bank account just for this. If you bring a dog with you they pay you I believe...

If you have a Nationwide credit card, you can still use it for unlimited commission-free purchases abroad. It's a shame they stopped doing it for debit cards. Limiting withdrawals, to prevent abuse, would've been nicer.

Halifax have a credit card that offers zero transaction charges and wholesale rates. Obviously you have to pay the interest (around 12% apr) though.

Same thing applies not only for ATMs, but also shops with card readers that sometimes offer to charge you in your home currency.

Hotels will also do this if they know you're from another country. Always checkout in-person at the desk and ask to review the bill before checking out. Make sure the charges are in the local currency.

Hotels are also a great way to get rid of extra foreign currency right before you leave the country. Ask them to put your remaining cash towards your bill and put the rest on your credit card. Avoids having to convert cash twice.

My home debit/ATM card also gives me a better exchange rate than any Forex desk I've ever seen. Why do people still use those? Is it solely due to familiarity with cash?

1. Remarkably, some people are under the (incorrect) impression that they will get a better rate at the bureau de change.

2. Some people like to have local currency before they enter the foreign country so they don't have to rely on finding a reliable local ATM before they can spend cash.

2'. In many countries, as soon as you step out of the airport and/or a comfy tourist district, cash is the only available payment method. Including the cost of transportation to the nearest ATM. Which may or may not have a skimmer on it.

This is true in Japan. Trying to find an ATM that accepts foreign cards is a nightmare. Post offices or 7-11s are the only reliable places.

1. Sometimes a bank can have better rates on ONE currency but not another, e.g. my bank, Nedbank [1], has better USD/ZAR rates but worse EUR/ZAR rates than Bidvest [2].

2. Depending on where you're from, some countries won't even grant you a visa unless you show them proof that you have sufficient foreign currency (e.g. Germany requires this of South Africans applying for a Schengen visa)

3. Specialist banks offer you additional benefits, e.g. Bidvest gave me 2 electronic bank cards to access funds in a separate, new, account when I travelled in Europe, which had 4 distinct advantages:

* lose one card I have a spare (my local bank couldn't offer that, nor would AMEX)

* my cards were not linked to my 'real' cheque account, protecting me in the event of theft and ensuring I had a backup plan if something really bad happened.

* I could protect myself from currency fluctuations by choosing to hold an account in a currency of my choice, e.g. EUR; if the exchange rate got worse, I used the EUR card, if it got better I used my local bank's credit card

* managing my budget was easier because I had allocated funds for the trip to my new travel account

[1] http://www.nedbank.co.za/website/content/travel_check/forex_...

[2] http://www.bidvestbank.co.za/foreign-exchange/retail-rates.a...

3. If you're moving between countries and have cash to change over.

Every time I've gone abroad, my debit card has failed to work, and I've had to spend 45 minutes on the phone to my bank to get them to make it work again. It doesn't matter if I go into the branch to tell them I'm going abroad, or whether I set it up on their website, or whether I just don't tell them at all. However vague or precise I am with the dates or the destination, when I arrive, my debit card doesn't work.

The bank are always apologetic when I return. But so what? I don't want to spend 45 minutes on the phone to somebody in the airport in a foreign country. It's time-consuming, and ridiculously expensive. So I go to the bureau de change.

I've found bureaux de change to give better exchange rates anyway - mostly. Shopping around can be worthwhile, as the favourability of the exchange rate seems to be inversely proportional to the convenience and salubriousness of the place.

wells fargo charges me a 3% foreign transaction fee every time i use my card abroad.

Except some foreign ATMs (e.g. Hungary) don't even show that dialog. They just charge you the currency conversion.

That is nasty as hell, and I'm surprised it's even legal: the expected default would be to charge in the local currency and let the card issuer handle the conversion.

Conversion without asking is actually against credit card merchant agreements (and I assume the debit card agreements too, although I actually can't find this anywhere). I wouldn't be surprised if you could complain to your bank if what was reported here was actually true.

One more rule... While you type your PIN, cover your typing hand with your free hand to thwart card skimmer cameras. This won't prevent keypad overlays from recording the PIN, but those are more expensive and more rare.

Anecdotally, I've experienced 0 incidents of fraud linked to using foreign ATMs, even those in questionable places. On the other hand, I've had several incidents linked to handing over my card to servers in downtown US restaurants.

One more rule...Never use an ATM in a strip club. They're the lords of exorbitant fees, stuff like "$20 or 10% of the withdrawl, whichever is greater".

I'm from the US and am currently living in London. I highly recommend a Charles Schwab bank account. No ATM fees and no foreign transaction fees. Also great customer service.

For a credit card, Chase Sapphire Preferred has no foreign transaction fees, and they waive the $95 annual fee for the first year.

Seconded. I got a Schwab bank account prior to traveling in Europe this summer. They rebate even international atm fees. (You might want to save your receipts in case they miss one, but I think they caught most of mine.)

For credit cards, most Capital One cards also have no foreign transaction fees. This site was quite helpful: http://www.nerdwallet.com/blog/top-credit-cards/nerdwallets-...

If you ask for local currency, then the bank has nothing to do but ask your bank to pay the amount you wished + hidden fee for the operation. The exchange rate used to debit your account will be of your bank for this moment.

In countries like India or Russia this fee could be up to 20% from the amount requested for foreign cards.

If you're asking for a currency exchange, you will be charged for this operation separately. The exchange rate will be what this particular ATM is programmed with.

Any bank charge extra for each operation.)

The same is true for credit cards I guess, I have a Dutch cc and my bank always give me a better rate than for example PayPal.

I thought this was going to be an article about avoiding card cloning in foreign ATM machines from the title.

A related question: are there any credit cards which don't charge exorbitant fees when used abroad? A friend of mine is planning on travelling extensively in East Asia, South Asia, Turkey, etc. for several months, and I'm looking for recommendations for her.

Charles Schwab Bank refunds all ATM transaction fees, domestic and international, and uses VISA wholesale currency conversion rates. It isn't a credit card, but it's probably the cheapest way to get cash short of taking it with from the start.

I have an account with this card. I called them before travelling internationally one time and made the customer service rep repeat the "no fees" part at least three times before I was satisfied I wasn't hearing her wrong. Great card and wonderful customer service. I highly recommend it.

Yes -- the Capital One cards are well known for not charging a foreign transaction fee. I keep one just for international travel.

Several of Chase's better cards offer no forex fees. I've spent most of the last few months in Southeast Asia and India and I used a Chase Sapphire Preferred card and a United MileagePlus Club card. Both waive forex fees.

Another card to look at is Charles Schwab's checking account. No forex fee and they refund all ATM fees, including foreign ATMs. No monthly fees or minimums on the account either.

Those two cards have saved me a ton of money in the last few months.

My Chinese cards (ICBC and Bank of Shanghai) charged nothing even remotely close to these fees when I used them in Taiwan, HK or Singapore. None of them had visa or mastercard logos though. They were on the UnionPay (银联). Similarly when I used my Taiwanese card (Fubon I think) in the US, I was only charged 70NT (~$2USD) for using an ATM as long as I could find a US ATM that didn't charge me.

In short, my experience has been that East Asian banks don't rip you off with exorbitant fees. They have terrible wait times and truckloads of annoying paperwork to do anything, but they're very restrained about fees.

Happily, after traveling for 5 months now in South America, I can report that you do NOT have to worry about this here. I've yet to see anything at all like this and have used ATMs in 6 countries and 37 cities.

Europe? We'll find out in a month or so.

Any suggestions for Canada? I don't go often enough to find a better solution than using an ATM there, but I do go often enough to feel ripped off every time I do.

I spent a week in Quebec City a month ago and didn't use any local currency -- just charged everything. Hotel, restaurants, gas; they all take Visa/MC. I don't expect to travel there often, so I didn't want the hassle of withdrawing too much and then getting screwed on both sides of the currency conversion (USD->CAD->USD).

Transferwise looks like a pretty cool startup.

Are you guys cheaper than Oanda? Do you plan to offer GBP->USD? (As a US citizen working in London, this is all I want.)

Hi @mherdeg,

Thanks for your comment and nice words. We're constantly working on new currencies and USD definitely high on our priority list. If you drop us an email to support [at] transferwise [dot] com we'll let you know as soon as it goes live. ;)

Can I suggest that you think a little bit about adding Saudi Riyal too? There's a huge host of expat workers there who get paid in Riyal but generally only ever spend dollars, pounds or euros...this kind of service would be perfect for them to transfer their money home.

Great tip for travelers, I will suggest you to do this everytime.

and PayPal does this too...

I've traveled to more than a dozen countries over the past two years and I've NEVER seen an ATM that asks me what currency I want to be charged in...

This is a more recent "service" that some banks are offering. I've seen it around the UK/Eurozone but rarely further than that. I've always said no to these screens because my bank doesn't charge me a commission on foreign withdrawals so I have no need for the 2% local markup.

Weird, where did you go? Every ATM I used in Spain for 10 months asked me. When paying by card, I always asked them to charge me in Euros and never had a problem (expect for my sketchy Spanish). I've had similar experiences in France, Italy and Germany.

Citibank does this on their Prague ATMs.

One look and I saw the massive rip-off for what it was(conversion from Czech Crowns into Swiss Francs) and avoid Citi ATMs like the plague since then.

As I recall the difference on withdrawing the equivalent of 500EUR would have been an additional ~50EUR for the convenience.

Thanks, but my local bank does such conversions just fine.

Same here - I can only recall one point at which I was asked.

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