When traveling abroad, if you find yourself using a foreign ATM, there are a number of pitfalls to steer clear from after you’ve entered your debit or credit card issued in your home country. Image Credit: Shutterstock

Dubai: You may have landed in an overseas country after having perfectly budgeted your spending for the trip. However, even the best laid plans can at times go awry because of a few costly mistakes that you were previously unaware of.

“When traveling abroad, if you find yourself using a foreign ATM, there are a number of pitfalls to steer clear from after you’ve entered your debit or credit card issued in your home country,” said Abbud Sharif, a banking industry analyst based in Dubai.

“The least impactful ATM mistakes could mean paying unnecessary fees, while the worst ATM mistakes could result in you being stranded abroad or even having your accounts cleared out. So, while ATMs are often a primary source of cash, it’s often not always the best possible option when travelling.”

Despite the convenience stemming from the ubiquity of cash machines, some of the below-mentioned ATM-related risks that come with using them abroad include additional inflated fees and a significant increase in the amount you may lose on the exchange rate.

Risk #1: Solely relying on one card alone for travel related expenses

“Even if you do your best to avoid all ATMs, sometimes a card may inexplicably not work in any of the machines you have travelled to. At times you may just be able to use just your credit card to withdraw cash,” explained Richa Dev, a Dubai-based independent travel consultant.

“When you travel, make sure you have a few different ways of paying for things; your bank card and a credit card are a bare minimum. I travel with a bank card and two credit cards. Other travellers recommend two of each.”

This will also prevent you from being without any resources in case of loss, theft, or a blocked account. Also, payment methods and technology can vary with each country, and your card could be declined or refused to be released post-transaction due to a possible red flag.

It’s always a good idea to have a second credit card, a second debit card, and a little bit of cash to make sure you have all your bases covered. Unsurprisingly, cash is still, as a rule, the easiest way to cover everyday purchases overseas. Also, your credit card is accepted in more places abroad than debit.

Risk #2: Ignoring your bank’s overseas transaction fees while travelling

When using the ATM, you may or may not get a warning of a ‘transaction fee’ being incurred, or if not a ‘currency conversion rate’. Regardless of getting a notification or not, it’s important to be aware that such mark-ups will be incurred – at least when you return home from overseas.

Explained: ‘Transaction fee’, ‘currency conversion rate’
A ‘transaction fee’ is a charge that a business must pay every time it processes a customer's payment. The cost of the transaction fee will vary depending on the service used.

A currency conversion rate, otherwise known as an exchange rate, is the rate at which one currency will be exchanged for another currency.

“Most banks charge you to withdraw money from a foreign ATM, which is a fixed fee per withdrawal, a percentage of the cash you withdraw, or both,” said Sharif. “These fees add up, and banks also suggest only withdrawing large amounts of cash in each ATM. Neither of these are good for travellers.”

Some companies don’t charge any fees at all for foreign currency conversion. The norm is still between 2.5 per cent and 3 per cent per transaction though, so don’t forget to investigate your card’s policies before you leave. A small detail that eventually will make a big difference to your wallet.

“Some international banks have an all-inclusive account option that includes free foreign ATM withdrawals. There’s a monthly fee to have the account, but if you maintain a certain monthly balance, that fee is waived,” added Sharif.

Risk #3: Negative charges come with overdrawing your ATM card’s limit

When it becomes necessary to withdraw cash abroad, knowing whether a limit applies is important. At many banks, it’s common to find your ATM withdrawals are subject to a daily limit. There may also be limits that apply per transaction.

Your ATM max withdrawal limit depends on who you bank with, as each bank establishes its own policies. Most often, ATM cash withdrawal limits range from $300 (about Dh1,000) to $1,000 (approx. Dh3,500) per day.

“It’s generally wise to set a low daily withdrawal limit just in case your card (and PIN) is stolen overseas. But if you forget that limit and try to withdraw more, your account could be frozen,” said Dev. “While a call to your bank will rectify this problem, you won’t be able to briefly get any money when you need it.”

Many bank accounts also come with an ‘overdraft’, which effectively lets you spend more money than is in your account up to a certain limit. But you are charged interest on this amount. Rates vary but some accounts have interest as high as 39 per cent, meaning your interest charges can soon mount up.

Verdict: The above costly mistakes at overseas ATMs can be easily avoided

While carrying foreign currency in cash is a widely recommended solution, if you don’t want to carry bulk amounts of cash, you can also ask your bank if it has an ATM alliance with any financial institution or lender in the country you’re travelling to.

Opening a bank account with an internationally recognised bank too helps in reducing withdrawal fees, but you still can’t do much more than withdraw money through these bank-affiliated ATMs abroad.

Experts also suggest only using a bank-owned ATM for your withdrawals, especially when you are travelling overseas. With these, you usually stand a much greater chance of avoiding the additional withdrawal fee – a fee which is totally separate to any charged by your own card or bank.

Credit experts also suggest using your debit card for occasional ATM withdrawals. Avoid taking out smaller amounts (service fees will be high) and try to choose ATMs in cities, as they charge fewer fees than those located in airports.

Keep in mind that if your card fails to work in an overseas ATM, it’s generally because your bank has frozen your account due to being flagged in a foreign machine as a possible fraudulent withdrawal. So, it is always a good idea to advise your bank of your travel plans.