Your long-awaited trip outside the U.S. can get a bit more expensive if you don't take the time to plan carefully. Foreign transaction fees often take travelers by surprise, eating into the budget they had created for lodging, transportation, dining, and more.[cite::219::cite] With some foresight, you can take steps to minimize or eliminate fees from banks that issue credit cards as well as the card networks themselves.

How Do Foreign Transaction Fees Work?

Say you're vacationing in Spain, and you pay for a meal with a credit card. The card is accepted globally, so there's really no problem with the method of payment. However, your credit card statement may tell another tale. On top of the bill for the dinner (let's assume a cost that equals $50 U.S.), you see additional charges for $5 from the issuing bank and $5 from the network, be it VISA, Mastercard, or others. That means you unknowingly paid an extra $10, or 20% more than the actual cost of the meal.

That's just one transaction. If you use the card repeatedly with merchants or at ATM kiosks, your Spain trip can quickly soar over budget. Similarly, convenient locations such as airports or hotels can pass on more transaction fees for exchanging currency or withdrawing cash.

How Can I Avoid Foreign Transaction Fees?

Avoiding or lessening the impact of foreign transaction fees simply requires some legwork.

Consider the following options before your next trip overseas:

1. No-Fee Credit Cards

Many banks issue credit cards that do not apply foreign transaction fees. Before you embark on an international trip, contact the card issuer to see if these fees exist. If so, ask if you can obtain a card that does not tack on the added costs.

2. Low-Cost Currency Exchanges

Inquire with your bank or credit union about currency exchange at a local branch. Some financial institutions may offer the service for free or at a cost that's less than what you might pay once you reach your destination.

3. Cash

If you feel comfortable traveling abroad with large amounts of cash, some countries accept the U.S. dollar alongside their own currencies. Panama, Belize, and Zimbabwe are three examples. Merchants in Vietnam, despite laws to the contrary, may gladly accept U.S. dollars for goods and services. That means, depending on your destination, you may be able to spend money freely without extra fees if you use cash.

4. International Bank Accounts

You may also bear less expense by opening an international checking or savings account.

For a prolonged stay or frequent visits, choose a bank that possesses a significant foreign footprint, and you should encounter fewer and less-costly transaction fees.

5. Travelers Checks

While travelers checks have fallen in usage and popularity recently, they still make a great option for emergency funds in the event credit cards or cash gets lost or stolen while you're traveling abroad. Some merchants may not accept this payment method, but it should be easy to find a bank that will convert them to the local currency.

The Wrap on Avoiding Foreign Transaction Fees

As the saying goes, an ounce of prevention is worth a pound of cure. Preparation ahead of international travel should include money management strategies in addition to hotel booking and restaurant reservations. Avoiding or limiting foreign transaction fees using the strategies above will make for a more enjoyable trip, whether it's for business or pleasure.