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The Truth about using your Bank Card Overseas

Tue, 04/04/2017 - 15:35

Using Credit Cards Overseas

When it comes to travelling overseas, using your regular bank debit or credit card is by far the easiest way to manage your travel money - its already in your purse or wallet, you don't need to work out exchange rates or schlep into the city or to a shopping centre to exchange your cash, and you can just withdraw more money when you run out. Easy as!

But, while it may be the easiest means of getting foreign currency, it is also the most expensive. By opting for convenience, your bank is reaping the benefits through a range of unexpected fees and charges -  essentially reducing your spending money by hundreds, if not thousands, of dollars that could otherwise be spent on your holiday.

Rather than blindly handing your hard earned money over to your bank, you can make your travel funds stretch further - it just takes a bit of research into your options, asking your bank a few questions, and reading the fine print that no one wants to read. To help you on your way, we have done a bit of the research for you, like what kinds of fees you might be charged, and how much they could be.

Currency Conversion Fees

This fee is the main culprit for the extra charges on your bank statement after a holiday. It is sometimes also called a foreign transaction fee, foreign currency conversion fee or cross currency conversion fee.

Whenever you use your debit or credit card to pay for something in a currency foreign to the default currency of your card (New Zealand dollars if your card is from a NZ bank), you will be charged this fee, because your bank has to convert Kiwi dollars into the foreign currency you require.

It is usually around 2.5% of the New Zealand dollar value of the transaction - so if you use your credit card to pay for a $3,000 hotel stay, you will also be charged an extra $75 in fees. If you then go out for dinner and use your card to pay the $100 bill - there's another $2.5 fee. And, if you then use your card to pay for your car hire - another $500 - there's another $12.50 fee. That's $90 just in fees right there!

It quickly adds up if you use your card to pay for everything, because you will be charged this fee each and every time you use that card overseas, and you could potentially be paying hundreds (if not thousands) of dollars in fees alone.

To give you an idea of what you might pay in fees, these are the currency conversion fees charged by the main four banks in New Zealand:

Data sourced from mentioned Banks websites- correct as at 23 March 2017

How to Avoid Currency Conversion Fees

The most obvious answer is to avoid using  bank plastic overseas - take cash with you, and arrange your foreign currency before you go, with a provider that does not charge a fee for currency conversions (like us!). But we understand that carrying loads of cash on you during your holiday is not necessarily the safest idea, so the other option is to use a prepaid travel money card (like our Multi-currency Cash Passport™)

You are less likely to be charged a currency conversion fee if your prepaid currency card supports the foreign currency you require, because you will have already exchanged NZD into said foreign currency at the time you loaded it onto your card.

Of course, this may not be the best way to avoid this fee if your travel money card does not support the currency of your holiday destination, because then your funds will be loaded as NZD (or whatever your default currency is) and you will still have to convert your funds into the foreign currency you need each time you use the card.

With a Cash Passport™ card, there is no fee if the currency you are transacting in is already loaded on to your card, but a currency conversion fee is applied if it is a currency that is either not supported by the card or is not loaded on to the card. You can see all of the fees and limits that apply to our currency card on our website


International ATM Withdrawal Fees

There are a number of different fees you could be charged when withdrawing money from an overseas ATM, using your New Zealand bank card, so let's take a look at all of them.

Overseas ATM fee

This fee is charged by your bank for using an ATM overseas because you are conducting a transaction outside of their network of ATMs.

Local ATM owner's fee

The local provider that owns the ATM you use overseas can also charge you a fee for using their machine. This fee will be disclosed at the time of transaction, and is set by the provider.

You could potentially be hit by both of these fees - each and every time you withdraw money from an overseas ATM. Can you just see your holiday funds depleting?

Cash Advance Fee

If you use your Credit Card to withdraw cash, you will also be charged a cash advance fee, on top of the ATM fees. This is because you are essentially borrowing money and your bank charges for this service. You will be charged this fee each time you withdraw using "Credit", and to make matters even worse  interest will start being charged from the moment you make the withdrawal.


So in a nutshell, if you use a debit card to withdraw money overseas, you could  be hit with two ATM fees and a currency conversion fee, while if you use your credit card to withdraw money you could be hit with all of those, plus a cash advance fee and interest!


At this point, you are just bleeding money!

How to Avoid International ATM Withdrawal Fees

You can potentially avoid an overseas ATM fee from your card provider by only using overseas ATM's that are linked to their international ATM partners.

For example, Westpac is in partnership with Deutsche Bank, Barclay's, Bank of America and DBS, so if you use an ATM overseas that is linked to one of these partners, this fee will be waived (you're still best off checking this applies to you because not all card providers have an global ATM network).

Also, not all overseas ATM providers charge a fee, so if you do a bit of research into this before you go, you could take with you a list of ATM providers that are potentially fee-free.

The other way to avoid being charged for using overseas ATM's is to just not use them. Or to at least minimise the number of times you need to use them by withdrawing larger sums of money each time. Then, you can just keep the cash you need for the day on you while out and about, and leave the rest safely locked up in your hotel room safe.

Finally, the best (and only) way to avoid a cash advance fee, and all that interest that comes with it, is to just not withdraw money on credit. If you need to withdraw money while you're on holiday, rather take out your own money and not the banks'.

If you were to use a Multi-currency Cash Passport, there are no fees for withdrawing^ from millions of ATMs everywhere Mastercard® is accepted.

Dynamic Currency Conversion

This fee is probably the most confusing and  expensive  option yet - because essentially you have to opt in to use Dynamic Currency Conversion (DCC), so you’ll pay the price by making an uninformed decision

How it works is if you're overseas using your New Zealand credit card, at the point of sale, the merchant can offer you the choice of paying in the local currency or in NZ dollars. This practise still quite new but in some countries is spreading widely, with some airports leading the charge. Logic dictates that if you opt for paying in NZD that you will then avoid the currency conversion fee, because you aren't converting your card's default currency into a foreign currency. Duh!

Well, actually, not really.

You still pay the currency conversion fee no matter which option you choose. The merchant uses the services of a third party to offer DCC as it is not offered by the card providers themselves. In exchange for this "service", the exchange rate you are charged is less than favourable because the rate includes the foreign exchange rate charged by the credit card company as well as a fee paid to the merchant and the DCC provider.

But, if you opt to pay in the local currency, then you just get the exchange rate offered by the credit card company, as opposed to this rate with a DCC service fee incorporated into it. However, this difference in rates is rarely exposed at the point of sale when the merchant asks you if you would like to pay in the local currency or in your currency - why would they when they get a cut of the DCC fee if you opt to pay in your own currency?

How to Avoid Dynamic Currency Conversion

The easiest thing to do is, if you are offered a choice, always opt to pay in the local currency if you are using your credit card to pay for goods or services overseas.

Easy Doesn't Mean Smart

After seeing just how much your card provider charges for overseas transactions and withdrawals, is it still worth the convenience? Wouldn't you rather have that money in your own pocket to spend on restaurant dinners, souvenirs and sightseeing?


It really doesn't take that much effort to organise your foreign currency before you go on holiday, especially if it means the result is more spending money for you. And, to help make it even easier for you (and to help you get the best deal possible on your foreign exchange), we offer a few ways to help you:

  • Set up a currency alert - this way you will get an email sent to your inbox when the foreign currency you need reaches a certain rate of exchange and you don't need to check the rate every day 
  • Order your foreign currency online - you can sit in your pyjamas, at 12pm or 10am, and order your foreign currency through our website and then just collect it from your nearest store when it is ready
  • Stores across the country - we have over 20 Travel Money NZ stores across the country, all filled with  Travel Money FXperts ready to help you with your foreign exchange. They are convenient and knowledgeable! And did we mention we’re fee and commission free on all cash transactions?

You can find your nearest store by entering your postcode into our Store Locator tool, or order your currency online anytime you want! Now, that's easy as! 

^ ^ Some ATM operators may charge an additional withdrawal fee. Fee information for Westpac, Kiwi Bank, ANZ and BNZ as per their respective website pages on Fees and Charges. The Multi-currency Cash Passport™ (“Cash Passport”) is an unsecured debt security issued by Travelex Card Services Limited, a member of the Travelex group. Cash Passport is not guaranteed by any member of the Travelex group or any other entity. Before you make a decision to acquire a Cash Passport, we recommend you to read the Product Disclosure Statement which is available free of charge at MasterCard® and the MasterCard Brand Mark are registered trademarks of MasterCard International Incorporated. This blog is provided for information only and does not take into consideration your objectives, financial situation or needs.  You should consider whether the information and suggestions contained in any blog entry are appropriate for you, having regard to your own objectives, financial situation and needs.  While we take reasonable care in providing the blog, we give no warranties or representations that it is complete or accurate, or is appropriate for you.  We are not liable for any loss caused, whether due to negligence or otherwise, arising from use of, or reliance on, the information and/or suggestions contained in this blog.