Navigating Credit Card Fees and Benefits Abroad: A Consumer Guide
When traveling internationally, Israeli consumers face several decisions regarding credit card usage that can significantly impact their expenses. A primary concern is the option presented at payment terminals abroad: to be charged in shekels or the local currency. Opting for shekels triggers 'dynamic currency conversion,' where the merchant or terminal operator sets the exchange rate, often adding a 5-7% premium over the official rate. For a $300 purchase, this could increase the cost by $33 to $110 compared to using the local currency. This principle applies to ATMs and foreign websites as well; always choose the local currency to save money.
To prevent credit card blocks due to suspected fraud, it is crucial to inform your credit card company of your travel dates and destinations before departing. Carrying a backup card from a different company is also recommended in case of theft or a blocked primary card. Several Israeli credit card companies offer cards with reduced or no foreign currency conversion fees. For example, Isracard has a card exempt from conversion fees on purchases abroad (excluding cash withdrawals), while OneZero offers zero fees on certain plans, though their free plan increased to 3% in July. American Express has a promotional offer of 0% fees up to NIS 1,000 for 30 days upon registration, and other plans reduce the fee to 1%.
Accumulating points on credit cards for travel can be less rewarding than expected. Spending NIS 8,000 monthly on a travel card might yield around 1,900 points annually, with NIS 4-5 equaling one point, depending on the card tier. Annual card fees can total NIS 467, potentially exceeding the value of points for infrequent travelers. The actual value of a point upon redemption is more critical than the quantity accumulated. Additionally, purchases made in currencies other than USD or EUR involve a double conversion, first by the international brand and then by the issuing company, adding to the cost. When returning an item purchased abroad, the refund is processed at the exchange rate of the credit day, not the purchase day, and the original conversion fee often remains, leading to a smaller credit than the initial payment.
Cash withdrawals abroad incur a 3-4% fee plus a fixed minimum fee and potential local ATM charges. A single large withdrawal is generally more cost-effective than multiple small ones. Some companies offer foreign currency wallets where users can pre-purchase currency at a set rate, avoiding additional conversion fees on transactions, though the rate itself includes the company's margin. The timing of foreign transactions appearing on your statement can also be a surprise, often appearing before your regular monthly billing date, potentially causing an unexpected deficit during your trip.
Travel insurance benefits included with credit cards vary. Cal offers five days, OneZero five days within a travel package, American Express seven days, and Isracard offers free extensions for family members up to 14 days for those purchasing a policy. This coverage can be insufficient for longer trips. Lounge access at Ben Gurion Airport has also changed, with Dan Lounge closed and replaced by Aspire Lounge, which charges NIS 290 per entry (or NIS 140 with a club benefit). The number of included lounge entries on premium cards has decreased, though some cards offer monthly credits for lounge access based on spending.
