Money Matters

Always say “Local currency please”

There is an ongoing legal “scam” the overseas retailers will try to take you on.  The Dynamic Currency Conversion (DCC) or Cardholder Preferred Currency (CPC) is a financial service pushed on you at many hotels, restaurants and other locations while traveling abroad.

The “service” is sold as a conveyance to you so that you can see how much the foreign charge is in your home currency.  Sounds so wonderful and helpful.

While abroad and paying a bill, a cashier may say “would you like to charge this in your home currency?”.  Some may not even ask and just opt you in.  But when you see the credit card slip to sign, all is revealed.  Along with agreeing to the charges, you are also agreeing the terms of the currency exchange.

Many times the exchange rate they use is not so bad, but still in their favor.  But they also add-on a service fee for the transaction!  To make matters worse, your credit card company will add a Foreign Transaction Fee to the charge.  Yes, even if it’s charged in your home currency, the charge is occurring outside of your country and the credit card can add-on the Foreign Transaction Fee.

When presented with this option – always say “local currency please”.

I have argued with many front desk staff over this practice.  Many honestly don’t understand what is happening and many times say it’s being charged in local currency and the US dollar indicated is only for my conveyance, no other charges.  In that case, I note on the slip that I decline the DCC and CPC and only agree to local charges in local currency – USD charge is NOT authorized.  Sign and go.

As you travel, you need to be on guard all the time – it’s not just the street thieves you need to be aware of.

Foreign Transaction Fees

A Foreign Transaction Fee is charged when you use your credit card outside of your home country.  Visa / MasterCard will typically charge 1% and your bank can also add another percentage or so.  Some credit-cards do not add these fees, but those are the exceptions.

In addition to obvious out of country charges, you can also be assessed these fees while never leaving home.  If the company you are buying from is banking outside of your home country, your credit-card may assess a Foreign Transaction fee.

There is nothing you can do about these – just be aware they exist.  If you are traveling on company business and doing an expese report, make sure to check your credit-card statement (you can see these online) and see what total charges were made for each of your transactions.

Always Carry 2 or More

When traveling make sure you have (2) credit cards with you.  A second card is a backup should he first have a problem (stolen, exceed limits, fraudulent charges / alerts and such).

By the way, a fraud alert is not uncommon when you travel.  These are easily cleared with a phone call, but can be stressful when checking out and racing to the airport.  What causes them?  banks seeing charges from a place you are normally not at.  If you don’t travel frequently, call your credit card before your trip and give them dates and countries you are visiting.

Also, make sure your second credit card is a real credit card and not a ATM card with a Visa / MasterCard logo.  Why?  An ATM card is much differnt from a credit card….read on.

Fake Credit Cards

Almost everyone carries a fake credit card – the banks like to call them ATM cards.  You know, the ATM card with the Visa / MasterCard logo.

Why do I call them fake?  Here are a few reasons to be careful when using these:

  • If you check into a hotel or rent a car, they will place a temporary charge on the card that will cover the expected expenses.  Your bank will immediately lock this amount of cash from your bank account making it unavailable for use.  When you check out, they will charge the actual amount.  That origianl charge will fall off in a few days.  Meantime, both charges on hold and the money unavailable to you.
  • If your card is compromised, your account can be drained.  An ATM card the money is gone and not as easy to reverse as if it was a normal Visa / MasterCard
  • If the above happen – any checks you may have written may bounce.  And you could still have lots of cash on deposit, but its locked due to pending charges.
  • Fraudulent or mistaken credit card charges make an immediate charge against your credit card account.  With a Fake Visa / MasterCard ATM card, those charges impact your bank account!  Just imagine if someone accidentally keyed in a $10,000 charge instead of $10.  Not sure about you, but my bank account doesn’t have that kind of balance to cover me.

Blocking Charges

When you check into a hotel, they will take an imprint of your credit card.  At the same time they are putting a blocked charge of around $100 to $150 per day of your stay.  This immediately blocks the amount of available credit on your card.  When you check out, the hotel will release the block as they will charge the final bill amount.

The blocked charge can take up to 15 days to clear from your card.  Ouch!

This is why you never use a debit card at a hotel as you could bounce a check or other charges while these blocks are set.

My solution around this is to use my American Express card at check in.  Typically Amex doesn’t have preset spending limits, so the blocked charges have no impact to me.   When I check out, I use a different card, a card that gives me the best rewards.

Chip & Pin

Many countries (Europe, China, India, Brazil, Japan and Canada to name a few) have moved beyond the magnetic strip type credit-card to a more advanced and secure credit-card that uses a microchip and pin.

While traveling abroad you will find USA credit-cards will not work at automated machines. You will have to seek an attendant for assistance.  If you are off the beaten path, a clerk may have trouble knowing how to process the transaction.

Why don’t USA credit-cards have this?  Credit-card companies have already invested a lot in the magnetic stripe and are resistant to the cost to upgrade to the more modern system.

Nothing you can do – just be prepared for the problem.

Car Loyalty Rewards

You have been loyal to you rental car company and are now ready to reap those rewards for a special vacation.  Be careful.

The insurance for the car rental awards are typically NOT COVERED by your credit card.

Typically when you rent a car with a major credit card you are covered with insurance from that card.  I say typically as there are lots of exclusions to coverage.

With a car rental award you may still use a credit card for taxes and other charges not covered by the reward.  But the normal insurance coverage is not there.  Do check your own policy, but this tends to be pretty standard.

Renter be warned.

Foreign Currency in Advance & Travelers Checks

Just say no to both of these.

There are many services that will sell you foreign currency prior to your trip and I still see in guide books recommendations to land with local money.  These services will give you a terrible exchange rate.

A decade ago Travelers Checks were great, but not today.

I carry a two hundred dollars in cash along with my ATM card.  Upon arrival the ATM is my first source for local currency and if needed, I still have green backs that can be exchanged.

Best Rates on the Street

It’s true that you will find much better exchange rates from people offering currency on the streets.  But is it worth the risk?

If you are dealing with a non-business and just some person on the street, there is a very strong chance you are going to be ripped off.

In the Philippines there are legitimate exchange dealers who have small offices on the streets.  They do offer a higher exchange rate.  But when you use one of these – everyone around knows you have cash and a lot of it.  No one walks to one of these to get the time or buy a soda – you are arriving and departing with cash.  To a criminal, this is easy research.

I play it safe and exchange cash off the street in places that feel and look safe.  And I am still very vigilant after the transaction and extremely suspicious of anyone who suddenly appears.