Whilst it is great for racking up those all-important air miles, using an American Express credit card abroad does not come without a price. Today we take a close look at American Express foreign currency charges. We’ll explain how to overcome the AMEX 2.99% foreign currency fees and provide some top tips on how to maximise the value of your travel money budget.
Last week, we were asked the following question by a MyTravelMoney.co.uk visitor. Infact, we have been asked almost the identical question a staggering twelve times in the past two months:
I own an American Express credit card. However, every time I buy something (pay for a hotel, restaurant) in a different currency they charge a single conversion commission of 2.99%. Consequently, I am paying heavy foreign exchange fees on each payment. What can I do to alleviate or reduce these charges?
As an unfortunate fact of life, almost all credit and debit card providers charge a mark-up on the exchange rate as a commission. Think of this as the ‘profit’ the foreign currency supplier factors into the exchange rate. Typically, this often sits at around 3-5%. So first and foremost, the American Express foreign currency charges are not abnormal compared to the wider market.
Furthermore, bear in mind that debit card providers will charge a one-off fee per transaction each time you are abroad. These can start to rack up over the course of your trip and leave you with a very rude awakening when you open your online banking after your holiday.
Top Tip – Always keep in the bank of your mind the following two transactions:
Point-of-sale transactions – a foreign exchange mark-up plus a fee (either a fixed amount, or a percentage of the transaction value, or both)
ATM withdrawals – a foreign exchange mark-up plus a fee (either a fixed amount, or a percentage of the transaction value subject to a minimum and maximum amount).
So what are your options?
The most obvious solution would be to look at opening other credit cards that offer a 0% mark up when making payments overseas. This doesn’t come without it’s issues. According to Oliver Emery of FairFX, ‘‘ there are still one or two on the market however suppliers seem to close the scheme as quickly as a new one opens and so it does not seem like the most sustainable model for card providers. Although you will be getting close to ‘spot’ rate, don’t forget you still have to pay for using credit.’’
The second option would be to purchase a prepaid currency card for spending abroad. Whilst these companies still profit from the margin built into the exchange rate every type you top up, according to FairFX, ‘‘they offer lower currency conversions and you are at less risk if the prepaid card is lost or stolen.’’
Prepaid currency cards can also a good way to take advantage of favourable currency rates. According to Michael Marchant-Jones of Caxton FX*, ‘‘they are denominated in a particular currency and the relevant currency is pre-purchased, thereby locking in an exchange rate to guard against subsequent currency fluctuations.’’
Two competitive cards to take a look at are the FairFX Anywhere card* and the Caxton Global traveller*. Whilst FairFX work to a 1.4% mark up on transactions and Caxton 2.75%, the later has no ATM charges for using the card abroad.
However, be warned. The prepaid currency card space is relatively embryonic. Some currency cards on the market actually charge more than debit/credit cards for currency conversion so do your research.
Good luck!
Some useful resources.
About to go abroad? Check out our dynamic travel money comparison tool for home delivery of currency.
MyTravelMoney.co.uk offers a prepaid currency card comparison where you can compare side by side the best value options on the market.
If you have any burning questions you would like our team of travel money experts to answer, feel free to ask away at [email protected]
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