Friday, September 07, 2012

Banking for Travelers

Image found here.
"Did you know we have been charged $60 in the last three months for debit card use?" Scott asked me over the phone last summer.  I winced.  I did not.  Apparently I wasn't watching our finances as closely as I should have been. Whoopsie.

Upon further inspection, we discovered lots more hidden fees and charges being applied to us from Chase Bank.  While I eventually got many of the charges and fees waived, I discovered that as long as we were using the card abroad, we were still going to be charged for every ATM withdrawal and every foreign purchase on our debit card.  This had to change.

According to my research, there is virtually no way to escape all fees associated with banking and travel abroad unless you go with cash enough to cover your expenses which is not recommended for obvious reasons.  So what do you do?  According to this great article - the first way to avoid excessive fees is to use credit cards for big purchases and debit cards for cash.  But what are the best banks and cards to use?

Well, I don't know if it's the best system, but here is what Scott and I are doing:

Credit Cards: We have a Capital One credit card for big purchases.  Typically, when you use a US credit card outside of the US, you will be charged in the foreign currency.   The cost to convert the foreign currency to the card's "home" currency is usually 1% (or $1 for every $100).  Some banks add a surcharge on top of that 1% just for fun.  Capital One does not.  Bills are easily paid online nowadays so the hassel of a paper trail is gone.  Insert sound of money falling into a piggy bank.

Debit Cards for Purchases: Using a debit card abroad for purchases can also be very expensive and add up over time with most Visa or MasterCard branded cards charging 1%-3% the cost of the purchase.  That said, we will be using our debit card only to withdraw cash and not to make purchases since we've got the good ole Capital One Card.

Debit Cards for ATM's: While I understand we pay for the convenience of being able to get money whenever and wherever, ATM fees abroad are often criminal and absurd. Most charge a flat fee (between $1-$5) for using a non-bank affiliated ATM (on TOP of what the foreign bank charges!), plus an additional "conversion" surcharge anywhere between 1%-3% of the total.  After learning that there was virtually no way to eliminate the fees we were being charged by Chase, Scott and I have decided to move our accounts over to Charles Schwab (thanks to the advice of some great blog followers!).  The checking account we selected requires no minimum balance and the only stipulation is that we have a Charles Schwab brokerage account (there is no minimum balance here either and there is no requirement to do anything with this account).  The main reason we selected Charles Schwab, however, is the fact that they charge no ATM fees anywhere in the world*.  Yeah, let me repeat that:  NO ATM FEES...ANYWHERE!  That is...amazing.

Savings: I will also have a savings account with Charles Schwab that my mom and/or dad will be tied to.  That way, if for any reason we need someone to deposit our checks or do any stateside banking for us - they are authorized to do so.  Because most of our accounts are going to be linked (my personal checking/savings, Scott's personal checking and our joint checking) we will be able to move money back and forth between these accounts and pay bills online with ease.

We have also kept one account with Bank of America, who are part of the Global ATM Alliance and have a pretty extensive network of affiliate banks around the world (the most important for the moment being Scotiabank, which is virtually all over the Caribbean).  This is just to have more options, because options are good.

While we know we are not going to avoid the greedy banks completely, it sure feels good to know we have a pretty good system to stay on top of it and avoid most fees associated with traveling abroad.  I'll be watching our accounts much more closely now!

Is there a better way?  How do you bank abroad?  We'd love to hear your thoughts!

* They actually do charge the fees upfront, but reimburse the account at the end of the month.


Mid-Life Cruising! said...

Great advice that we'll definitely use once we finally get out there ... thanks for sharing!

NatGeoWannaBe said...

Good advice on limiting the debit card use for cash only. Be aware too that when using a debit card, your liability in the event of theft or fraud is unlimited (i.e. thieves can drain your account without the bank reimbursing you for loss), while credit card companies will typically reverse fraudulent charges and limit liability to $50 or thereabouts. One more reason to limit debit card use.

Online Banking Reviews said...

I must take your advice, it is a good advice to all Debit cards and atm cards.

Dave said...

I use USAA which is available to anybody that is in the military or if your parents are in the military or if they are a current member because they're parents are a member. It's awesome. It charges no fees in the country, and refunds the other bank's ATM fees up to $15 a month and only charges a 1% fee for foreign transactions and I can deposit checks from my iPhone or any computer & scanner.

Verena said...

We use Capital One for everything and have been very happy. However, we have to contact them every month to get the ATM fees reimbursed manually. Apparently they just get a total from the foreign ATM and have no way of knowing how much the fees were. I'm guessing you will have to do the same with Charles Schwab.
I use Mint to track our spending. They will send me an email as soon as there are any unwanted fees. I'm a bit out of control when it comes to finances so I could go on and on...
More tips on my Finances page if you're curious:

Neophyte Cruiser said...

It's great to hear you've managed to find a way to protect your family's finances while cruising. Keeping a portion of your brokerage account in cash will allow you to do on-line transfers between your Schwab accounts. Good luck on your move!

Carolyn Shearlock - The Boat Galley said...

Another thing -- often the foreign bank's ATM fees are a flat fee -- in other words, the fee is the same whether yo withdraw $20 or $1000. So always withdraw the max. This cut our fees tremendously!

Also, you need to have two or three different cards that are in no way tied, so that if one has a security breach and cancels/reissues cards, you've got an alternative. We learned this the hard way in El Salvador and had to beg to get our old card reinstated long enough to get some cash, and then pay to get the new card Fed Ex'd to us. We had two different cards, and hadn't realized they were indirectly tied.

Christy_DepartureDiaries said...

Great advice! I have two Chase credit cards with zero foreign transaction fees that I use regularly out of the country (Sapphire and British Air - both also great because I accrue mileage for all purchases.)

I'm very excited to hear about Charles Schwab's zero fee policy as I'm moving abroad next year. So helpful!!

I wish the rest of the world would adopt the UK's zero ATM fee law.

Thanks for the great article.

Steve said...

Traveled a lot overseas in my career (airline pilot). I always used Fidelity for my banking. They were free for all ATM withdrawals, no fees for any kind of banking and they offer a free AMEX card (that pays 2% back on all purchases, with no limit). I liked AMEX better overseas. They have much better customer service than VISA. Also, with Fidelity, you have one 800# to use in case of problems, etc. You go right to a live person on your 'team' when you call. Couldn't be happier with them. BTW, I would echo what has been said about using a debit card, especially in a foreign country... just throw it away right now. Its more problems than its worth. No protection if you get hacked... and at some point you will .... for sure.


Paul A said...

I just have to say, Isla's signature is amazing for such a young sailor. (Couldn't help myself)

B.J. Porter said...

We've got the Capital One card and are happy with it.

One interesting & aggravating problem I came across recently was with Fidelity; I tried to set up an account there so I could use their iPhone check scanning to deposit checks (among other features).

Many of us cruising use a commercial mail agent (how many neighbors at 411 Walnut Street do we have here??) which uses a Personal Mail Box address. This is not a P.O. Box, but is considered a legitimate street address and is different that a P.O. Box because of the commercial mail agency arrangement. Fedex and UPS can deliver there, for example which they can not to a P.O. Box.

Fidelity refused to accept this as my legal address. They INSISTED I must provide them a utility bill to prove I lived there, and stated they were required by the USA PATRIOT Act to get a physical legal residence address in order to validate my account.

When I pointed out that the IRS, the US Coast Guard, the Dukes County Voter Registrar, the Florida DMV, and every other bank, credit card and brokerage I used all were OK with this as my LEGAL RESIDENCE ADDRESS they simply didn't care.

I asked them "I live on a boat, it moves around from place to place. I have legally established this address as my residence and you won't take it - what do YOU suggest I use for a legal address then?" they did not have an answer.

I finally gave them the address of the empty house we are trying to sell with some copies of old bills...they told me that might work if I sent them better quality scans or faxes. At which point I told them there are plenty of other financial institutions that might actually want my business and not to bother.

So beware; if you do change residence to a mailing service yo may run into problems establishing new accounts at that address.

BTW, Paypal now has an feature in their iPhone App that allows you to scan checks in remotely too.

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