Credit Cards & Cash Advances

Using credit cards—Visa, MasterCard, American Express, and others—when traveling in Europe

Europe takes plastic—in fact, credit cards are usually the easiest and most-cost effective method of paying for anything while traveling.

Europe takes plastic, right down to most of the smallest shops and bistros. And, contrary to the old commercials, you can leave home without

American Express

(www.americanexpress.com) and never notice the difference.

Visa

(www.visa.com) and

MasterCard

(www.mastercard.com) are much more widely accepted abroad these days, partly because they've partnered with major European cards, and partly because AMEX charges higher fees to the merchants and is slower in paying them, so many small family businesses have stopped accepting it, arguing—with a good point—that nowadays "Everybody has Visa!"

Diner's Club

(www.dinersclub.com) is accepted in many places (though usually, as expected, only the pricier joints). So is

Japan's JCB

(which I throw in there in case any Japanese people happen to be reading this.).

Discover

or any other card will only elicit a raised eyebrow of curiosity and shake of the head from your waiter or merchant; leave any other card at home.

Playing the rate game

While paying with credit cards does get you a better

exchange rate

than with cash, know that Visa itself has now started imposing a 1% "commission" for foreign purchases/cash advances.

Many Visa-issuing banks—recognizing yet another good way to fleece its own customers—quickly followed suit by tacking on additional 1%, 2%, or even 3% "commissions" of their own. They will tell you this is a banking fee for performing the currency exchange. They are lying.

This is because: (a) The Visa corp has already performed the currency exchange before the transaction ever gets to your issuing bank (which receives the transaction in dollars), and (b) it's all electronic, so there's really nothing to "exchange" in the first place. These extra few percentage points your bank is charging is 100% profit for them, pure and simple, and they are stealing it from you.

When compared to exchanging traveler's checks or cash, within the space of a few years credit cards have gone from being the better deal to being either on par or actually costing you more—especially when it comes to cash advances (more on that in a minute).

Plus, many credit cards are now charging exorbitant "transaction fees" of $5 or more (plus a laughably inflated APR, which starts accruing immediately) for each cash advance through a credit card, so read the fine print carefully when choosing which Visa card to use on the road.

Use

cash advances

only in emergencies (see below). These credit card folks are counting on your complacency to keep milking you for money. Don't give them the satisfaction.

Your best bet for a friendly credit card like this is a very small local bank chain or credit union. Of the big national credit card issuers, here are a few I know of that (at least last time I checked) charge either 1% or nothing: Captial One (www.capitalone.com) charging nothing; HSBC (www.hsbc.com) and Providian (www.providian.com) charge 1%.

You can get much more on this (and other finincial issues) at the excellent financial planning site BankRate.com (www.bankrate.com).

The computer yells "Stop, thief!" You're left high and dry

Let your card's issuing bank know that you're taking a trip. Most companies have a computerized watchdog that monitors your card's use, looking for radical changes in the frequency or location of charges. When it finds them, it freezes the account.

Ideally, this system alerts them if someone steals your card and goes on a shopping spree, but it has the unfortunate side effect of leaving travelers in the lurch, because on a typical vacation you're charging more than usual and charging from strange places. (For what to do in case of real theft, see the "Losing Things" section.)

Avoiding cash advance charges

Whenever you get a cash advance on a credit card,

the bank starts charging you interest immediately

, not after the end of the billing cycle's month as they do with purchases.

That means if you take out $200 on the first day of a two-week trip, for two weeks the credit card issuer will be charging you the highest possible interest rate (not that introductory 9.67%, but the industry ceiling of 19% or more), compounded daily, and will continue to do so until you pay your entire credit card bill all the way down. They often tack on a one-time "service fee" as well.

You may be able to avoid this, however, by being a bit sneaky: they can only charge you interest if you're carrying a balance. The trick is to make sure you never carry a balance on the card by overpaying your bill (by however much you expect to withdraw in cash advances, plus purchases) the month before you leave. It's silly, but it usually works.