debit cards foreign currency
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Debit cards for foreign currency

Using debit cards for foreign currency transactions is a step on from traditional credit card purchases. Debit cards have proven to be an extremely popular one, offering benefits to a far wider range of consumers, retailers and financial institutions.

Unlike credit cards, debit cards offer no credit facility. They are purely guaranteed by a person's own funds which are provided prior to use. No interest rate is applied on the funds you taking out (unlike credit cards) as there is no borrowing that has been entered into, and they are unable to be used without the support of pre-allocated funds.

Using debit cards abroad

Travelling overseas with a debit card is relatively similar to doing so with a credit card, with the exception of using one's own funds not credit. Purchases that are made are susceptible to the same adverse foreign exchange margin in favour of the debit card provider however (generally 2-3 cents or units away from the actual currency rate).

The major downside is that a LOT of debit card issuers also charge you a flat fee to take out your own money. Typical is 1.50 per transaction (so whether you take out $10 or 100 you still pay that 1.50 fee. However, you may also have to watch whether the 1.50 is actully a minimum charge - so taking out 500 may mean you are eligible to pay your bank 1.5% or 7.50 for that single transaction. Check your issuer's small print or call them to find out what the actually rates are before you go.

Any other pitfalls?

There may also be a fee to initiate the debit card facility for use abroad and while this will amount to about 35, the main difference lies in loading the debit card with funds prior to purchase in a single transaction, either online or within the financial institution. In this manner, a third party can apply funds to the card without any expense, but each time the card is loaded, the user incurs a fee. Generally there is a flat fee of 5-8 per load, and the user has the choice of paying a lesser fee for funds to be cleared within 3 business days or paying the greater fee for immediate clearance of funds.

Cash withdrawals, similar to that with credit cards, are discouraged by an onerous administrative charge; however in the age of electronic purchases, the necessity to use a debit card to finance purchases is trivial considering that so very many retailers now accept credit cards and their accompanying infrastructure. The customer will need to use a personal identification number in order to use the card at a retail outlet; however, more often than not they will need to choose credit on the electronic system of sale, and sign for their purchase.

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-- Additional useful articles --
»  Credit card currency for cash abroad
»  Travelers cheques an option?
»  Comparing currency exchange options
»  Background on travelers cheques
»  Foreign exchange explained

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