Credit card vs. ATM vs. travelers’ checks

My wife, Glenda, and I traveled in Central Europe for a month in fall 2005 and used two credit cards for purchases and services (an American Express card and a Citibank MasterCard) and one debit card for ATM cash withdrawals (a Visa card obtained from our credit union). After returning home, we compared the exchange rates we obtained when we used two cards on the same day. We did not use all three cards on the same day so don’t have a valid 3-way comparison.

The MasterCard added a 3% finance charge at the end of each monthly statement period. No explicitly stated fees were added by the American Express card or the Visa debit card.

On Sept. 12, the exchange rate was $1.242 per €1 for a debit card ATM withdrawal and $1.270 per euro for a MasterCard purchase (after adding the 3% fee). This made the MasterCard exchange rate 2% worse than the debit card rate, a difference which was reduced to only 1% after considering the 1% cashback we obtained from the MasterCard (after the first $3,000 of charges in each year).

On Sept. 23 we used both the MasterCard (for a purchase) and the American Express card (for a hotel bill). After adding the 3% fee for the MasterCard, the exchange rates for the two cards were identical, namely $1.242 per euro. So which one is better depends on benefits offered by these cards (like a percentage cashback or travel bonuses).

Ultimately, the differences between the three cards, if any, was insignificant.

Now, to add travelers’ checks to this comparison, on Sept. 22 we received €189.77 at an Austrian bank for $250 worth of travelers’ checks, which is an exchange rate of $1.317 per euro (after deducting a €12.50 commission). On the same day, we received an exchange rate of $1.240 per euro (after adding the 3% fee and deducting the 1% cashback) paying a restaurant bill with our MasterCard. A day later, we received an exchange rate of $1.242 per euro for our hotel bill using our American Express card.

On Sept. 28, we received €193.94 at a different Austrian bank for $250 worth of travelers’ checks, which is an exchange rate of $1.289 per euro (after deducting a €11.40 commission). On the same day, we received an exchange rate of $1.221 per euro for our hotel bill using the American Express card and $1.230 per euro for a restaurant bill using our MasterCard (after adding the 3% fee and deducting the 1% cashback).

The above means that the credit cards gave us exchange rates about 4.8% to 5.6% better than the travelers’ checks.

We always take travelers’ checks as fallbacks, however, in case we run out of local cash and can’t find an ATM, a business does not accept credit cards or there is an electrical blackout or computer breakdown that prevents us from using any plastic.

ALBIN BRANDSTETTER
Springfield, OR