The Points You Earn Abroad, and What They Cost
Picture a woman named Mira who has a year abroad ahead of her and likes to earn points. Three cards sit on her table, and each has a headline. The first promises 2 percent back on everything. The second promises 1.5 percent. The third promises 2 percent and has an annual fee of $95.
She expects to spend about $36,000 a year abroad by card. Before choosing, she does what most of us skip. She reads the line about spending outside her home country. The first card charges 3 percent. The other two charge nothing.
Three cards on $36,000 of spending abroad in a year (an illustration)
| Card | Points earned | Fees paid | Net for the year |
|---|---|---|---|
| A: 2% back, 3% foreign fee | $720 | $1,080 | -$360 |
| B: 1.5% back, no foreign fee | $540 | $0 | $540 |
| C: 2% back, no foreign fee, $95 annual fee | $720 | $95 | $625 |
The card with the best headline loses $360 a year. The one with the smallest headline earns $540.
Mira counts a point as one cent, which is a modest number. Some cards let you move points to airline programs, where a point can be worth more. Some pay less if you cash them out as a credit on the statement. She looks at what the points can do and decides that one cent is fair for the arithmetic.
She notices one more line. If she carries a balance, interest takes more than points give. At 22 percent a year, a $2,000 balance for a month costs about $37, and the points on $2,000 of spending are $40. A month of carrying a balance can cancel a month of points.
She chooses card C and sets it to pay in full every month.
You might say points are a small thing. They are small each month, about $52 for Mira. Over a year they can cover a good part of a flight home.
Before she moves, Mira asks her bank two more questions. How are the points valued when I redeem them? What happens to my card if I give a foreign address? Some banks ask for a home address and may limit or close an account when a customer moves abroad, so it is worth asking before the move and not after.
You could compare your own cards by net and not by headline: points earned, minus the foreign fee, minus the annual fee. You could do it for a month of your actual spending, and then multiply by twelve.
Which card do you use abroad, and what did you find when you read the line about foreign spending? Tell us in the comments. Someone reading may be about to choose theirs.
Tell us in the comments