Don't use credit cards abroad

It used to be that when traveling abroad, paying with a credit card was the smartest way to avoid paying outrageous currency conversion charges.  The currency conversion places at airports were, and still are, a ripoff -- often you'll lose 5-10 % of your money when you exchange dollars for the local currency.  This is because those places hit you in two ways: (1) you pay a commission to change money (2) the rate you are offered is much worse than the market rate.  The credit card companies, on the other hand, would charge no fees or commissions. And to make things better, they do the conversion at the interbank rates -- the best rates possible.

Now, though, credit card companies charge 3% "foreign transaction fees" which alter the balance significantly.  For example, a $9.85 purchase in Australian dollars was converted to $8.42, and we were charged an additional 3%.  This brings the cost of each Australian dollar to 88.05 cents. A better deal is what I got with my ATM card. Because I bank at a small bank which has no ATM fees, the $300  I withdrew at an ATM cost me $257.27, meaning that the effective rate was only 85.76 cents.  There were no extra fees or surcharges.   I save $3 on every $100 I spent using cash (from the ATM) rather than using my credit card.

Bottom line: When traveling abroad, use your ATM card to withdraw cash in the local currency. Then pay for everything with cash.  From now on, I'm going to use my credit card only for things like hotels where I can not pay with cash.  If your bank charges for ATM usage, just withdraw a lot of money at once, so that you pay the surcharge only once.  For example, if your bank's ATM surcharge is $3, you come out ahead as long as you withdraw more than $100 U.S. dollars at a time.