Winner: Capital One
This award recognizes the charge card that minimizes the losses that accompany most systems of currency exchange. As with other cards, our selection is based strictly on travel features, not financial terms.
The winner: Capital One. Cards in the Capital One family assess no surcharges on foreign-currency transactions, and even absorb the 1 percent exchange fees that the international MasterCard and Visa networks apply when they convert foreign charges to U.S. dollars for transmission to issuing banks. To our knowledge, no other widely available cards add no charge at all.
Capital One issues dozens of different cards, with differing reward scales, APRs, eligibility requirements, and other features; annual fees run from $0 to $59. In general, these cards offer award scales similar to other bank cards, but the no-surcharge feature is unique:
- For air travel rewards, the leading Capital One option is the Venture card, which awards two miles per dollar charged. It's a typical "bank buys" travel card—when a cardholder wants to travel, the bank buys a ticket on any airline in exchange for the number of points determined by the ticket price. Each Capital One mile is worth one cent toward the purchase of a ticket, so a typical $300 round-trip ticket would require 30,000 points, earned by $15,000 in purchases—below the minimum threshold with most bank cards and well below the minimum threshold of $25,000 required for a coach ticket in most airline-card programs. Miles can also be converted to cash at the competitive rate of one cent per mile.
- For cash-back awards, the No Hassle Cash Rewards card pays 3 percent cashback on groceries and gasoline and 1 percent on all other purchases—again as good as the competition.
Bank-buys programs such as Capital One's are generally superior to airline programs for travelers who don't earn many miles by flying, and prefer to travel in coach/economy classes. Because the bank buys tickets, seats are not limited by the airlines' very stingy allowances for "free" frequent flyer seats. Bank-buys programs, however, are virtually useless for upgrades and premium-class travel.
Beyond miles or cash awards, Capital One cards offer the usual bag of other charge card benefits: secondary coverage for rented cards, various guarantee provisions, and such.
Other good cards: Several giant banks reduce or eliminate the foreign purchase surcharge on a few premium credit card accounts—typically those issued to small numbers of high-net-worth individuals or on deals negotiated with business cards.
For mere mortals, some small banks with limited markets and credit unions either add no surcharge or pass along only the 1 percent conversion fee. According to the most recent published data, these banks include American Bank, E-Trade, State Farm, USAA, and several other credit unions. These, too, are excellent cards for foreign travel.
With either bank-buys or airline-program awards, most other bank cards add a total of 3 percent to foreign purchases—the 1 percent conversion fee charged by the international networks plus their own 2 percent for doing absolutely nothing—and the majority of those banks even surcharge foreign purchases made in U.S. dollars.
American Express also adds roughly 2.7 percent to foreign currency charges but not to foreign charges denominated in dollars. And AmEx cards earn mileage that can be transferred into the programs of AirTran, Continental, Delta, Frontier, JetBlue, Southwest, and more than a dozen foreign lines.
Overall, however, even cards that add the full 3 percent surcharge still charge less for foreign exchange than what travelers lose when exchanging currency or travelers checks. Whatever the brand, plastic is still the best bet for major overseas purchases.
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