Source: thepointsguy.com
Foreign transaction fees are irritating little charges that every traveler has faced, and most credit card users have questioned. They are the bane of a frequent flyerâs life and if not managed carefully, could result in some serious charges. But what are these charges, why do they exist, whatâs the average fee, and how can you avoid them?
What is a Foreign Transaction Fee?
A foreign transaction fee is a surcharge levied every time you make a payment in a foreign currency or transfer money through a foreign bank. These fees are charged by credit card networks and issuers, often totaling around 3%.
For example, imagine that youâre on holiday in the United Kingdom, where all transactions occur in Pound Sterling. You go out for a meal and use your credit card to pay a bill of £150. Your credit card issuer first converts this sum into US Dollars and then charges a foreign transaction fee, after which the network (Visa, MasterCard, American Express) will do the same.
If we assume that £150 equates to exactly $200, this will show on your credit card statement first followed by a separate foreign transaction fee of $6.
When Will You Pay Foreign Transaction Fees?
If youâre moving money from a US bank account to an international account in a different currency, thereâs a good chance you will be hit with foreign transaction fees and may also be charged additional transfer fees. More commonly, these fees are charged every time you make a payment in a foreign currency.
Many years ago, foreign transaction fees were limited to purchases made in other currencies, but they are now charged for online purchases as well. If the site youâre using is based in another country, thereâs a good chance youâll face these charges.
It isnât always easy to know in advance whether these fees will be charged or not. Many foreign based sites use software that automatically detects your location and changes the currency as soon as you visit. To you, it seems like everything is listed in dollars, but you may actually be paying in a foreign currency.
Other Issues that American Travelers FaceÂ
Foreign transaction fees arenât the only issue you will encounter when trying to use American reward credit cards abroad. If we return to the previous example of a holiday in the UK, you may discover that the restaurant doesnât accept your credit card at all.
In the UK, as in the US, Visa and MasterCard are the two most common credit card networks and are accepted anywhere you can use a credit or debit card. However, while Discover is the third most common network in the US, itâs all but non-existent in the UK.Â
Discover has claimed that the card has âmoderateâ acceptance in the UK, but this is a generous description and unless youâre shopping in locations that tailor for many tourists and American tourists in particular, it likely wonât be accepted.
There are similar issues with American Express, albeit to a lesser extent. AMEX is the third most common provider in the UK, but finding a retailer that actually accepts this card is very hit and miss.
Do Foreign Transaction Fees Count Towards Credit Card Rewards?
Foreign transaction fees, and all other bank and credit card fees, do not count towards your rewards total but the initial charge does. If we return to the previous example of a $200 restaurant payment, you will earn reward points on that $200 but not on the additional $6 that you pay in fees.
How to Avoid Foreign Transaction Fees
The easiest way to avoid foreign transaction fees is to use a credit card that doesnât charge them. Some premium cards and reward cards will absorb the fee charged for these transactions, which means you can take your credit card with you when you travel and donât have to worry about extra charges.
This is key, because simply converting your dollars to your target currency isnât the best way to avoid foreign transaction fees. A currency conversion will come with its own fees and itâs also very risky to carry large sums of cash with you when youâre on vacation.Â
Credit Cards Without Foreign Transaction Fees
All credit card offers are required to clearly state a host of basic features, including interest rates, reward schemes, and annual fees. However, you may need to do a little digging to learn about foreign transaction fees. These fees can be found in the credit cardâs terms and conditions, which should be listed in full on the providerâs website.
To get you started, here are a few credit cards that donât charge foreign transaction fees:
Summary: One of Many Fees
Foreign transaction fees are just some of the many fees you could be paying every month. Credit cards work on a system of rewards and penalties; youâre rewarded when you make qualifying purchases and penalized when you make payments in foreign currencies and in casinos, and when you use your card to withdraw cash.
Many of these fees are fixed as a percentage of your total spend, but some also charge interest and you will pay this even if you clear your balance in full every month. To avoid being hit with these fees, pay attention to the terms and conditions and look for cards that wonât punish you for the things you do regularly.
What is a Foreign Transaction Fee and How Can You Avoid It? is a post from Pocket Your Dollars.
Source: pocketyourdollars.com
Your credit cards journey is officially underway.
Keep an eye on your inboxâweâll be sending over your first message soon.
A recent trend in credit card rewards is increased flexibility in how you can redeem your cash back, points or miles. You can book travel, invest, get gift cards and more â but one of the most common ways a credit card company will issue rewards is as a statement credit.
Statement credits may seem simple, but theyâre handled a little differently by each rewards program, and thereâs a lot to consider when youâre trying to decide if theyâre the best way to redeem cash back or other rewards.
See related:Â What is cash back?
Put simply, a statement credit is money credited to your account. In its most basic form, a statement credit is not much different from a payment. Like a normal monthly payment, a statement credit is deducted from your card balance, reducing the amount of money you owe. But where cardholders are responsible for payments, credits come from either a merchant or card issuer.
rewards cards also allow you to redeem the points or miles youâve earned as statement credits. While some cards allow you to use a statement credit to reduce your balance with no restrictions, others only apply credits to your account after you meet certain criteria or make purchases in specific spending categories.
Cash back cards usually make it easy to redeem your points as a statement credit. In most cases, all you need to do is meet the cardâs minimum redemption criteria, then choose a statement credit as your redemption method. Once a credit is applied to your account, your card balance decreases accordingly.
If, for example, you were to spend $3,000 with a flat rate 1 percent cash back card, youâd earn a $30 credit; and if you were to redeem this entire credit, $30 would be deducted from your account balance.
While many cards give you the option to request your cash back in the form a check, some only allow you to redeem as a statement credit â so be sure to read your issuerâs terms carefully. After all, when you get your cash back as a check or direct deposit, the money is yours to spend or save as youâd like. With a statement credit, however, the funds are âtrappedâ in your account and only impact your card balance. If you stop using your card or close your account, you could lose any cash back or points you havenât redeemed.
If you prefer to redeem your rewards as a statement credit, make sure doing so doesnât dilute the value of your points or miles, as each rewards program grants and values statement credits a little differently.
Statement credits also frequently appear as part of a card introductory or annual bonus, when issuers offer to reward you if you spend a certain amount of money within a given timeframe. The Blue Cash Preferred® Card from American Express, for example, offers a $250 bonus after you spend $1,000 with your new card in the first 3 months. Instead of simply sending you a check for $250, however, American Express credits your account $250 after youâve met the conditions of the offer. Once received, the credit will cover the next $250 you charge.
Many cards also award extra perks in the form of a statement credit. The United Explorer Card and Chase Sapphire Reserve, for example, each offer up to a $100 credit to cover the cost of a Global Entry or TSA PreCheck application.
In these cases, a statement credit is applied to your account only after you make the eligible purchase and cannot be used for anything else.
Hereâs how some of the major rewards programs treat statement credits:
| Rewards program | Can you redeem rewards as a statement credit? | Minimum redemption | Rewards rate when redeemed as a credit |
|---|---|---|---|
| Discover cards Cashback Bonus | Yes | None | 1:1 |
| Bank of America Cash Rewards | Yes | None ($25 for automatic redemptions) | 1:1 |
| American Express Membership Rewards | Yes | $25 | 1:0.6 |
| Chase Ultimate Rewards | Yes | $20 | 1:1 |
Once you know what a statement credit is and how itâs treated by your rewards program, youâll probably wonder if itâs smart to redeem your points or miles in this form. While the answer will depend on your spending habits, goals and financial situation, it makes more sense in certain circumstances.
If youâre trying to decide whether you should redeem your points as a credit statement, consider the following:
Many cards offer several other options for redeeming your rewards. In addition to statement credits, you may be able to redeem cash back, points, or miles for:
A statement credit is just one way you can receive bonuses and redeem the rewards youâve earned. If youâre using a cash back card, it could be a smart, low-maintenance way to reduce your balance and build good spending habits. If youâre using a more flexible rewards or travel card, though, make sure redeeming as a statement credit still gets you fair value for your points or miles.
Source: creditcards.com
Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the authorâs alone, and have not been reviewed, approved or otherwise endorsed by the issuer.
Credit card companies typically offer a plethora of rewards options for their cardholders to take advantage of. But cash back has long been a favorite of many, as it gives you the chance to earn cold, hard money for making everyday purchases. If youâre confused about how cash back works, read on for a full explanation.
How Cash Back Works
At its core, cash back refers to a predetermined percentage of a purchase you make being returned to you as cash rewards. Cash back rates typically range between 1% and 5%, though there are some outliers to be mindful of. Credit card issuers will usually clearly label what types of purchases earn what level of cash back. But like anything in the credit card industry, you must read the fine print.
This is mainly because all purchases and cash back rewards are governed by merchant category codes, or MCCs. Credit card companies ultimately determine these designations, with Mastercard, Visa, American Express and Discover calling the shots. Some common codes are ârestaurant,â âdepartment store,â âairlineâ and âentertainment,â among others. So if you earn 5% bonus cash back at restaurants and you go to Burger King â which has a restaurant MCC â youâll get that 5% back.
But what these limiting MCCs sometimes donât take into account are businesses that could fit into more than one category. Included in this group are hotels, superstores like Walmart, tourist attractions like museums and other multi-faceted establishments. In turn, you could lose out on cash back if youâre confused about which category a purchase you made falls into.
As an example, letâs say your family orders room service while on vacation in The Bahamas. You pay with your credit card thinking youâll get the advertised 3% cash back on dining. When your credit card statement comes in the mail, however, youâve only received the base 1% earnings. This is because the MCC of your hotel is just that, a hotel, which leaves your credit card issuer blind to what you really bought.
Unfortunately situations like these often offer very little recourse, as your cardâs issuer has no ability to change these codes. In fact, only the major credit companies can change their own code selections.
New cardholders will often receive cash back promotions and bonuses. These offers can either be recurring â monthly, quarterly, yearly, etc. â or simply for just one period of time, usually at the beginning of your accountâs life. Hypothetically, a recurring bonus might look like this: âEarn 3% cash back at supermarkets and wholesale clubs, up to $1,500 in purchases each quarter.â On the other hand, a one-time promotion might allow for 5% cash back on airfare purchases made during the first three months youâre a cardholder.
Depending on your card, cash back may be capped or it could expire after a period of time. While some cards feature both an earnings limit and expiration dates, others may have no restrictions. All cash back cards have their own, unique system surrounding them. So itâs important to refer to your documentation whenever you have a particular question.
Using Your Cash Back Earnings
The vast majority of cash back credit cards offer variations of the same choices for redeeming rewards. Most often, youâll see statement credits, checks, bank account deposits, gift cards and charitable donations available to you.
Itâs by far the easiest to redeem cash back through your card issuerâs website that it provides. Here youâll not only see your rewards status, you will also know every possible redemption you could make. If youâd rather talk to a real person, most companies still have rewards phone lines you can call, as well.
Those whoâd rather not have to worry about where their rewards currently stand will find that a redemption threshold might be helpful. Not all cards offer this feature. But if yours does, set a threshold at which your cash back is automatically redeemed in any manner you desire. Additionally, some cards require you to attain a certain amount of cash back before redeeming is possible.
Cash Back With Each Major Credit Card Company
There are tons of different cash back cards, depending on your credit score you may be eligible for some but not others. While itâs impossible to give universal specifics for each credit card company, below weâve provided overviews of some of the most popular cash back cards.
Citi Double Cash Card (Mastercard)
Cash Back Rate: 1% at the time of purchase, 1% when you pay them off
Limit or Expiration: No limit; Expires if no eligible purchases are made for 12 months
Redemption Options: As a check, statement credit or gift card
The âdouble cashâ nature of the Citi Double Cash Card means you effectively earn cash back twice: first when you make the initial purchase and again when you pay your credit card bill. The 12-month expiration is fairly standard and the lack of limits on how much cash back you can earn is generous. Statement credits, checks and gift cards are three of the most common redemption choices, so itâs no surprise to see them offered here.
Bank of America® Cash Rewards credit card (Mastercard)
Cash Back Rate: 3% in the category of your choice, 2% on purchases at grocery stores and wholesale clubs, 1% on other purchases
Limit or Expiration: Cash back on choice category, grocery stores and wholesale club purchases is limited on up to $2,500 in combined purchases each quarter; No expiration dates
Redemption Options: Once you have $25 or more, you can redeem as a statement credit, a check or a deposit to an eligible Bank of America® or Merrill Lynch® account
Take note of the combined $2,500 quarterly limit on 3% and 2% cash back in category of choice and at grocery stores and wholesale clubs, respectively. The Bank of America® Cash Rewards credit card also requires cardholders to have a minimum of $25 in earned cash back before they can redeem.
Blue Cash Everyday American Express Card
(American Express)
Cash Back Rate: 3% on U.S. supermarket purchases, 2% on U.S. gas stations and select U.S. department store purchases, 1% on other purchases
Limit or Expiration: 3% rate at U.S. supermarkets is limited to $6,000 a year in purchases then drops to 1%; No expiration dates
Redemption Options: After earning at least $25, redeem as a statement credit in $25 increments; Gift cards and merchandise redemptions from time to time
Amex offers some of the strongest rewards cards around, and the Blue Cash Everyday American Express Card is no exception. It does come with some limits; namely the 3% cash back rate on U.S. grocery store purchases is capped at $6,000 in purchases a year. At that time, cardholders earn 1% in cash back on groceries.
Discover it® Card
(Discover)
Cash Back Rate: 5% in rotating categories like gas station, supermarket, restaurant, Amazon.com and wholesale club purchases, 1% on other purchases; Full cash back match at the end of your first year
Limit or Expiration: $1,500 cap on purchases that earn the 5% rate each quarter; No expiration dates
Redemption Options: Statement credits, deposits to a bank account, gift cards and eCertificates, pay with cash back at select merchants and charitable donations
Discover cards offer great first-year cash back matches and distinctive cash back categories. These traits are on full display with the Discover it® Card. This includes 5% cash back on purchases ranging from dining to Amazon.com. However, there are limits for this rate and you have to opt in to categories each quarter to qualify. This card also offers five redemption options â the most on this list.
Tips to Maximize Cash Back Potential and Minimize Credit Risk
Photo Credit: ©iStock.com/4Ã6, ©iStock.com/Pgiam, ©iStock.com/Ridofranz
Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the authorâs alone, and have not been reviewed, approved or otherwise endorsed by the issuer.
Advertiser Disclosure: The card offers that appear on this site are from companies from which SmartAsset.com receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). SmartAsset.com does not include all card companies or all card offers available in the marketplace.
The post How Does Cash Back Work? appeared first on SmartAsset Blog.
Source: smartasset.com
Your credit cards journey is officially underway.
Keep an eye on your inboxâweâll be sending over your first message soon.
Surveys consistently show that no credit card reward is more popular than cold, hard cash. Indeed, cash back cards came out well ahead of other types of rewards cards in a recent CreditCards.com survey, which found that close to half of U.S. adults own a cash back credit card.
And for good reason: Instead of having to decipher a complex redemption scheme, you can opt for a simple, straightforward reward and use it in the way that fits you best.
Here we take a look at some of the most common types of cash back redemption, along with some of the restrictions you may encounter when redeeming your rewards.
Cash back cards come in a variety of flavors, but they all fundamentally work the same way: As you make purchases with your card, you earn cash rewards at a set rate. There are three major types of cash back cards.
See related:Â What is cash back?
Depending on your card and issuer, you may have a variety of choices in how you redeem your cash back rewards. Some issuers even allow you to set up an automatic redemption, meaning your redemption would automatically initiate after a set number of days or after you earn a certain amount in rewards.
The most common ways to redeem cash back are:
One of the most common ways to redeem cash back is as a statement credit. A statement credit is money credited to your account that reduces your card balance. For example, if you were to spend $1,000 with a card that offers 1.5% cash back on every purchase, youâd earn $15 in cash back rewards; and if you were to redeem this cash back as a statement credit, your balance would decrease by $15 to $985.
Blue Cash Preferred® Card from American Express, for example, requires you to have earned $25 in cash back before you can redeem as a statement credit.
Once youâve met your cardâs redemption requirements, you can simply choose a statement credit as your preferred cash back redemption.
A slightly smaller number of credit card rewards programs let you redeem your rewards for âtrueâ cash back in the form of a check or direct deposit to your bank account. Claiming your cash back in this way gives you a bit more leeway since you can save or spend your rewards however you like instead of having them âlockedâ into a particular card account.
As with statement credits, the requirements for requesting a check vary from card to card, with some issuers requiring you to have earned a minimum amount of cash back before you can request a check and others imposing relatively few restrictions.
Direct deposits tend to be a bit trickier across the board, especially if you donât already have a banking relationship with your credit card issuer.
Wells Fargo Cash Wise Visa® card lets you claim your cash back via an ATM (in $20 increments only) if you have a Wells Fargo Bank account.
Along with manually requesting a statement credit, check or direct deposit, a number of cards allow you to set up automatic cash back redemption. If your card allows automatic redemption, your cash back is generally distributed at set times or after youâve earned a certain amount.
Most credit card issuers also give you the option of redeeming your cash back through a rewards portal for online shopping or as gift cards to select department stores, restaurants, video streaming services and more.
Having the option to use your rewards for travel allows you to enjoy the benefits of travel rewards with a cash back card and is especially common among cash back cards that use points or allow you to choose between cash back and points.
As you can see, cash back redemption options vary considerably from issuer to issuer and card to card. Hereâs a closer look at how cash back redemption breaks down with some of the most popular cash back credit cards.
| Card | Redeem as a statement credit? | Redeem as a check? | Redeem as a direct deposit? |
|---|---|---|---|
| Blue Cash Preferred® Card from American Express | Yes (once youâve earned $25 in cash back) | No | No |
| Bank of America® Cash Rewards credit card | Yes (once youâve earned $25 in cash back) | Yes (once youâve earned $25 in cash back) | Yes (into a Bank of America checking or savings account, once youâve earned $25 in cash back) |
| Capital One Quicksilver Cash Rewards Credit Card | Yes, anytime | Yes, anytime | No |
| Chase Freedom Unlimited® | Yes, anytime | Yes, anytime | Yes |
| Citi® Double Cash Card | Yes (once youâve earned $25 in cash back) | Yes (once youâve earned $25 in cash back) | Yes (to a linked Citi savings or checking account or to a checking account from which youâve paid your Citi credit card bill at least twice) |
| Discover it® Cash Back | Yes, anytime | No | Yes |
With all those options for redeeming for cash, which one is best?
The key point to consider is whether your rewards lose any value when redeemed in a certain way. You want to make sure you are getting the most value back, so be careful if you redeem for merchandise, which can be worth less than rewards redeemed for straight cash.
That said, unless your issuer offers a bonus for claiming your rewards as a statement credit instead of âtrueâ cash back, you should simply stick to whichever option is most convenient.
One drawback to cash rewards is they often donât feel like actual rewards because they get swept up into your ongoing finances. If that bothers you, you might consider taking note of how much you are receiving in cash rewards, then rewarding yourself by spending that amount on something you want, so that you feel like youâre getting a reward.
Either way, thatâs the best aspect of cash back rewards: Itâs your decision.
Your redemption options are just one consideration when choosing a credit card. Consider these factors:
When shopping around for cash back cards, find the card that will work the hardest for you, not the other way around. In other words, a cash back rate of 5% at restaurants is great, but not if you rarely eat out. Bottom line: Find a credit card that matches the largest portions of your budget.
Also, be honest about how much thought you want to give to your credit card. If you prefer a âset and forgetâ approach, a flat-rate card is a better choice than a rotating bonus category card.
With so many great no annual fee cards, you might wonder why you would ever get a card with an annual fee. But often, the rewards rates are so much better that it actually makes sense to get the card with the annual fee. For example, comparing the Blue Cash Everyday® Card from American Express and the Blue Cash Preferred® Card from American Express, we found that consumers who spend more than $3,200 annually at U.S. supermarkets ($267 per month) were actually better off with Blue Cash Preferred, which has a $95 annual fee.
From redemption options to bonus categories, each cash back card is designed for a different type of consumer. If you havenât found your perfect match yet, try our CardMatch⢠tool, which can deliver personalized credit card offers in seconds with no impact on your credit score.
All information about the Capital One Savor Cash Rewards Credit Card and the Amazon Prime Rewards Visa Signature Card has been collected independently by CreditCards.com. The issuers did not provide the content, nor are they responsible for its accuracy.
Source: creditcards.com
Some people are seeing an increased signup bonus on the American Express business Platinum card when using a referral link and going incognito:
This offer is being reported by some r/churning members as appearing when they click the referral link incognito. I don’t see it on a few links I checked, YMMV.
We’ve seen 110,000 point offer that required $25,000 in spend on a non-referral offer; this one is for less spend and gives your friend the referrer credit – might be the best offer we’ve ever seen. Some are also able to get 100,000 after $10,000 in spend via the call in method.
Might be worth waiting a few days to see how the ‘exciting offers’ on Business Platinum pans out. As always you can read more about American Express cards here.
Source: doctorofcredit.com