Question: I'm going to Europe: what credit card has the lowest exchange fees?

Answer: Most credit unions or Capital One no foreign transaction fee credit card offers should be considered potential candidates.

International fees are added by multiple sources for purchases made overseas. Your bank will probably add 1-3 percent as a "foreign currency-conversion fee." This means they offer the service of converting the local currency cost of an international purchase into the U.S. dollar amount that shows up on your credit card bill. This is in addition to your credit card fee. Likewise a merchant might typically add another 3-6 percent to convert the charge into U.S. dollars. The combination of charges depends on the varying rates from the card you use, the bank that issues the card, and the merchant's policies.

But you should also be aware that none of the nation's credit unions charge these kinds of fees nor do most small community banks. However even with surcharges thrown in, paying by credit card is still considered less costly than converting cash overseas. Banks or foreign currency exchange dealers swap your dollars at less-favorable "consumer" rates of exchange, plus they charge fees of their own.

On the other hand some of the best no foreign transaction fee credit cards from Capital One and most credit unions currently not only do not charge an additional foreign exchange fee, they also do not pass along the 1 percent currency conversion charge. But whichever source you select, read the fine print about foreign transactions before you sign the application. In fact, I would speak to a customer representative in advance on this issue before getting a card.

Regardless of which card you choose, research the exchange rate before travelling. Take out as much money at a time as you feel comfortable carrying, rather than making multiple stops at ATMs. Avoid the change bureaus you see everywhere in airports, train stations and touristy areas. They usually have the worst rates. Try to use credit cards whenever possible for large purchases.

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