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New ATM ‘Scam’ Targets Travelers Reprinted from this Smarter Travel site

Almost all of you know how easy it is to avoid the fees on foreign credit card charges. Most big banks now issue at least one no-foreign-fee version of their cards, especially those that target travelers. But when you travel outside the U.S., you still face two significant exchange gotchas that can hit you for up to 10 percent of the transaction.

Non-Bank ATMs Fees
Time was, you could find ATMs from major local banks in the international arrivals areas of just about every foreign international gateway airport. Barclay’s, PNB, Deutsche Bank, you name it: Debit-card cash withdrawals were subject only to the usual fees, typically either about $3 per transaction, or up to a 3 percent conversion fee. And many U.S. banks issue debit cards that either omit or forgive foreign withdrawal fees.

But about two years ago, big airports started cutting deals giving exclusive ATM rights to a single operator. And, in most cases, that operator isn’t a giant full-service bank; instead, it’s the same outfit that runs the airport’s currency exchange desk. Often, it’s Travelex, but you also see American Express, Moneycorp, and others.
The gotcha is obvious: Although the machines tout “no fee,” they give you the same lousy exchange rate you’d get at the exchange counter. And that can cost you far more than the usual withdrawal fee—as much as 10 percent, compared with using a real bank’s ATM.

More recently, ATMs operated by exchange outfits are turning up in downtown locations as well as airports. They feel like a scam, but they’re not out-and-out frauds; technically, they are actual ATMs. But they’re not affiliated with a conventional bank, and they’ll gouge you on the exchange rates, same as at airports.
Even when you have no carry-over foreign currency from a previous trip, however, you can easily avoid the gouge:

  • Before you leave home, log onto the ATM locator for your debit card’s network to locate an ATM at or near your arrival airport that is not affiliated with an exchange outfit: here are Visa and MasterCard.
  • Use a credit card to pay for your ride into the city, then find the nearest big-bank ATM to get your local cash with a debit card. This is especially easy when you use airport rail services, which normally accept credit and debit cards for ticket counter or automated ticket purchase. Also, many taxis now accept credit cards.
  • When you get to the city center or wherever else you’re going, look for an ATM sponsored by a big bank your recognize. Be especially wary of any ATM that advertises “no fee,” a tipoff that the ATM actually belongs to a retail exchange outfit.

Charge in Dollars
All too often, at a foreign hotel, restaurant, or rental car counter, the clerk/waiter/agent will suggest that for your “convenience” he or she will be happy to charge you in dollars rather than local currency.

The gotcha here is that the hotel, restaurant, or rental car company sets the exchange rate—a rate that is almost always much worse than the rate the international banking system gives you. And if that gouge isn’t enough, even when your charge is in dollars, your bank will still add whatever fees it adds to all foreign transactions.
Your remedy here is obvious: Outside the U.S., always insist that your credit card charge is in local currency, not dollars. You’ll avoid gouges as high as 10 percent.

Beware the New Airport ATM Scam
You don’t need to buy foreign currency in advance. The big banks all have ATMs at important gateway airports, so just use your ATM card when you arrive. You won’t lose more than about 3 percent in the exchange, and cards from some U.S. issuers impose no foreign exchange fee or ATM fee at all.” That’s the mantra most travel writers and I have been repeating for years, but now it has to change. You have to revise your on-arrival strategy.

The travel industry hates to see consumers get too many really good deals, and they’re shutting the door on good exchange rates at airport ATMs. When I arrived at Gatwick Airport two weeks ago, I no longer saw ATMs operated by Barclay’s (my go-to bank in the U.K.) or any of the other worldwide or nationwide banks. Instead, I saw a bunch of ATMs operated by Travelex, with big signs that read, “Free withdrawal.” And yes, you can withdraw pounds with no withdrawal fee. But what you do pay is a really bad exchange rate—it looked to me that you’d lose about 10 to 11 percent, the same as you lose at the retail exchange counter. I saw the same system when I departed from Stansted Airport.

A representative of the Civil Aviation Authority, the agency that monitors consumer issues in air travel in Britain, told me that the retail foreign exchange folks have cut deals with airport management to oust the real banks and give retail foreign exchange outfits a monopoly, for which privilege they pay fat fees to the airports. A representative of ABTA, the association of travel agents and tour operators and U.K. equivalent of ASTA, summed it up by saying, “The worst place to exchange currency is at an airport.” This consumer issue hasn’t loomed large on the British scene because locals can, in fact, withdraw pounds with no fees; the practice hits only visitors.

As far as I can tell, this problem is now widespread in Europe. For other main European gateway airports, the worldwide MasterCard and Visa ATM locators show the only one with big-bank ATMs inside the arrivals hall was Dublin. I found no arrival-hall big-bank ATMs at Amsterdam/Schiphol, Copenhagen/Kastrup, London/Heathrow, Madrid/Barajas, Milan/Malpensa, Paris/De Gaulle, Rome/Fiumichino, or Zurich. Although plentiful, arrival-hall ATMs at these airports were all run by retail foreign exchange outfits. Yes, they may take MasterCard and Visa debit cards, but they’ll also take your money. Locators showed lots of legitimate big-bank ATMs near those big airports: Some appear to be within easy walking distance of the airport; others are up to a mile or so away from the terminal.

The implications for travelers are clear: If you don’t have enough local cash left over from a previous trip to get to your hotel, you can use your credit or debit card to buy train tickets to the city center, and many taxis now take credit cards. But if, for some reason, you really need cash on arrival, you also have options:

  • First, get online with the worldwide MasterCard or Visa locators to discover the situation at your arrival airport. If you have a preferred local bank, check its ATM locator.
  • If you can’t find a convenient legitimate ATM, consider arranging $20 to $50 in arrival currency through your bank or credit card for delivery before you leave.
  • Alternatively, you can withdraw just enough to get you to your hotel from one of the airport ATMs.

Once settled, you revert to the old rule: Big buys on a credit card, cash from a debit card. That’s still relevant.

Beyond the ATM issue, my credit cards are not creating any problems on my current trip. My American Express card, which has a chip, worked seamlessly at every establishment that accepts AmEx. My stripe-only cards worked, as well, but sometimes with a bit more fuss. I have had no occasion to try them in automated systems. Clearly, we’ll all be better off next year when most U.S. banks actually issue chip cards.

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