I got slammed with huge credit card fees when I bought a penguin-shaped magnet at the southern tip of Argentina. I was dripping wet as I stood in line at a hot springs spa in Iceland, waiting for an ATM. I don't think I used a credit card for a full three full months when I lived in Japan.
Despite traveling extensively, I've never fully mastered the art of paying while abroad. There are lots of tactics for optimizing how you pay in a foreign country, but my strategy has always been to subsist on cash, withdrawn from ATMs in as few transactions as possible to minimize fees. That's because many credit cards -- mine included -- charge about 3 percent on every foreign transaction.
My next trip is to Ethiopia and Kenya. And this time, I want to do it right.
For me, this means finally getting a no-foreign-transaction-fee credit card. I can't tell you why I haven't already done this (inertia?), but a no-fee card is a powerful way to pay for things in other countries. I'll still use ATMs for cash, but using a card means I may be able to dispute fraudulent charges, earn rewards even when I'm out of the country and potentially lock down some of the best exchange rates around.
There are so many credit cards out there that deciding on one can be intimidating. Here's the step-by-step process I followed and the decision I made.
Question #1: 'What rewards structure fits my lifestyle?'
The primary requirement for my new card was no foreign transaction fees. But beyond that, I wanted to nab as many rewards as I could. So the first thing I had to think about was what kind of rewards I was looking for.
"People should look for a card that provides rewards they will actually use, whether frequent flyer miles, cash back or other less-quantifiable benefits such as lounge access or a free checked bag," says Scott Mackenzie of TravelCodex.com, a blog about travel-hacking and rewards.
This ruled out airline-specific cards, as I'm not loyal to a particular airline and haven't accumulated a ton of miles. In addition, Mackenzie says, "Most airline credit cards are inferior to cards that earn bonus points on all flights, or all travel, rather than tickets on that specific airline . . . most people will be better served by a flexible currency like Ultimate Rewards® (from Chase) or Membership Rewards® (from American Express) that can be used as cash or transferred to an airline or hotel loyalty program."
I was also leery about applying for a card with a complicated rewards system. While you can seriously maximize your dollars by timing which card to use when or spending a crazy amount on this quarter's promotional category, it's important to remember that doing so can be a lot of work.
Verdict: Personally, I wasn't prepared to spend tons of time or effort understanding and keeping track of my rewards program. I decided I'd rather cash out easily. Check.
Question #2: 'Should I pay an annual fee?'
If you're considering a card that has an annual fee, "the benefits (of the card you choose) should outweigh that fee," Mackenzie says. Currently, I only have one card with a fee -- the American Express Blue Cash Preferred® -- and I'm willing to pay $75 a year because I earn back hundreds of dollars, making it totally worthwhile for me.
Verdict: While Mackenzie says cards without annual fees tend to offer less impressive rewards, I'm not planning to use this new travel card as my primary credit card in everyday life. It's more of a "nice to have" to avoid foreign fees. As such, I probably won't get enough use out of it to make an annual fee worthwhile.
Question #3: 'Do I care about interest rates?'
For anyone planning on keeping a balance, interest rates are extremely important. After all, that's the rate at which the debt you owe keeps compounding and growing. Ideally, though, it's great to pay off your monthly debts on time and in full to avoid paying interest as well as getting into any uncontrollable debt spirals.
Verdict: If I were planning on carrying a balance, the interest rate of my future card would've mattered. Rewards cards tend to come with higher rates than cards without any sweet deals, and often the rewards you might earn won't outweigh the additional interest. I make it a habit to pay off my bill in full every month, so I hope that I'll never have to pay those rates. That's why, for me, interest rates aren't a big factor when choosing a card--though they will certainly become important if I ever do wind up carrying a balance.
Moment of truth: "Is my credit score high enough?"
Before getting my heart set on a card that requires stellar credit, it was important to know whether I might realistically qualify. If not, there would surely be other options without a foreign transaction fee, though the rewards would probably be less awesome.
I checked in and confirmed: According to Credit Karma, my score was excellent and would likely be strong enough to qualify me for most cards I wanted.
The top contenders
In the end, here were my parameters:
- No foreign transaction fee
- No annual fee
- Easy-to-use rewards structure
After sifting through lots of different options, these were my top picks:
- Discover it®: You get 1 percent cash back on most purchases and 5 percent back in rotating categories on up to $1,500 each quarter. What I found most attractive was that it's currently matching all the cash back new cardholders earn at the end of their first year.
- Discover it Miles®: You earn 1.5 miles per dollar, which is just as good as cash back because 100 miles can be cashed out for $1. That comes out to 1.5 percent cash back. This card also matches your total miles at the end of the first year (for new cardmembers) and reimburses up to $30 of in-flight Wi-Fi annually.
- CapitalOne® Quicksilver® Rewards: You earn a flat 1.5 percent cash back on all purchases, plus a $150 cash bonus after you spend $500 in the first three months.
Although the Discover it®'s rewards rate could come out to more than 1.5 percent cash back when you include the 5 percent categories, I'm skeptical of rotating categories because they likely include some sectors I don't care about. For example, gas is a big category for many Americans, but I don't have a car! So that was out.
I almost applied for the Discover it Miles® card because the rewards would come out to 3 percent back in the first year (after Discover matches your rewards earned), and I would enjoy the Wi-Fi credit. But unfortunately, Discover isn't widely accepted outside of the United States. According to the company, the card is only accepted in Canada, China and some parts of Latin America.
In the end, I chose the CapitalOne® Quicksilver® Rewards card, which is a MasterCard® -- one of the most widely accepted credit cards worldwide. I was approved online and my card should arrive just in time for take-off.
If you're looking for a card to use overseas, it's worth doing a little research on your destination of choice. I don't expect that I'll be able to use my new card that much in a developing country like Ethiopia, but I probably can in Kenya, at least around the big capital city of Nairobi. At any rate, I can't believe I didn't get a no-transaction-fee card sooner -- I'm glad to have it now and for future trips!
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