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Credit cards vs. cash?

3 Aug

Before heading to Madrid, Justin and I did a little bit of legwork to try to make the financial side of our life as simple as possible, and to try to keep as much money in our bank account as possible since there are fees for everything, especially when you are abroad.

For cash, we have Capitol One debit card that we use at any ATM.  There are no foreign transaction fees on the withdrawals (banks typically charge between 2-3%), although I have noticed that we pay $2 each time we take out money.  Our strategy is to take out the maximum out as infrequently as possible.  Capitol One is not our regular bank, so we have a bit of a system where we use our online savings account with Ing Direct as a way of moving our money around between our accounts (for free).  It’s worked great so far.

For purchases, we use a credit card that charges no foreign transaction fees (again, most banks charge about 3%).  The benefit to using the credit card for purchases rather than cash is that the best exchange rates are inter-bank rates, so by using the credit card, we get to access these better rates through the issuing bank (my understanding is that banks pool all transactions in a day and then the “exchange” occurs at a much better rate than what you would receive as an individual).  The credit card we have been using is a British Airways Visa, issued by Chase.  We responded to a promotion to get the card and ended up with 100k frequent flyer miles as a bonus…2 freebie international tickets on British Airways!  We’ve been really happy with this BA card and avoiding foreign transaction fees.  We have had no issues with stores declining the card, presumably because we remembered to call Chase to put a travel alert on our card so that they knew to expect purchases from Spain and Germany.

Things were excellent until the Madrid Metro payment machine ate Justin’s card the other day.  Unexpectedly, the machine refused to release the card, and there was no one around to help.  Justin tried bitch-slapping the machine, but that didn’t work, either.

We called Chase, cancelled the card, and happily, Chase is sending replacements to us here in Madrid via UPS.  We should get them in the next day or two.  It’s really nice when sometimes, if you ask nicely, companies will help you out!

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