My favorite explanation of the current economic crisis.

Maxed Out’s James Scurlock and Elizabeth Warren on NightLine

I’ve been working in India for the past 3 weeks and have learned a few things about using a credit card in a foreign country. The last time I was in a foreign country was over 6 years ago but was there for so long that I opened a local bank account and was able to avoid any fees.  However, for most of us, travelling to a foreign country means bringing along our own debit/credit cards - so here are a few things to keep in mind.

Inform Your Credit Card Company / Bank You’re Leaving

Before leaving on your trip - no matter how long or short it may be - give your bank and/or credit card company a call.  Inform them that you’ll be travelling and be sure to give them the dates you are travelling and to which countries.  This will prevent your card from being “flagged” for fraudulent activity.  If the credit card company sees your card suddenly being used in India - someplace you’ve never travelled before - then you could find your next purchase declined due to fraudulent activity.  Calling your bank or credit card ahead of time will save you time and frustration.

Fees, Charges, and Conversion - Oh My!

Something that many people do not know is that credit card companies like to take advantage of international travelers by charging them fees for using their card abroad - but it doesn’t stop there.  Not only will a company charge you a fee for using your card overseas, but they might also charge you a currency conversion fee.

International Fee: This fee is charged by most credit card companies for any purchase made internationally.  This fee, typically added to your purchase price, mean you could end up paying as much as 10 percent more for purchases made while abroad.  The latest fee rates I could find are:

Bank of America
• 3% for credit/debit card purchases
• $5 and 1% at ATMs; fee waived if using Global ATM Alliance machine

Chase
• 3% for credit/debit card purchases
• 3% of ATM withdrawals

Citibank
• 3% for credit/debit card purchases
• 3% at non-Citibank ATMs
• Will reimburse ATM fees if you applied for a checking account online

HSBC
• 1% for credit/debit card purchases
• $1.50 max for ATM fee

Wachovia
• 1% of credit/debit card purchases
• 1% of ATM withdrawal PLUS network fee

Washington Mutual
• 1% of credit/debit card purchases
• 3% of ATM withdrawal PLUS 1% charged by
Master Card and Visa

Wells Fargo
• 3% credit/debit purchases
• $5/withdrawal at ATM

Dynamic Currency Conversion Fee: A relatively newcomer to the fee-charging party, this fee allows a foreign merchant to convert your bill from foreign currency to U.S. dollars using their own rates (which of course are higher than normal). However, DCC is only used with Visa and MasterCard - American Express charges 2.5 percent per day for foreign transaction fees and they do not charge cardholders DCC rates. The fee for DCC ranges between 3–10 percent depending on the fee charged by the technology partner and the fee charged by the bank issuing the debit/credit card.

Conversion Fee: Your bank might charge you a 1 percent to 3 percent “foreign currency-conversion fee” for the service of converting the local currency cost of an international purchase into the U.S. dollar amount that shows up on your credit card bill.  How nice of your bank, right?

Find a Solution That Fits

Knowing now that using your credit or debit card could be costlier than you thought - what should you do?  You have a few options:

1. If time is on your side, consider finding a card or bank that doesn’t charge these ridiculous fees (Capital One seems like a good choice)

2. Consider using your corporate card - the user agreements are much different.  For example, my corporate AMEX card doesn’t charge me an international fee - so I’ve been using it for personal purchases as well.

3. Look into purchasing a pre-paid Visa or Mastercard in the country you will be traveling to.

4. Carry cash. It goes without saying that carrying cash is more risky than plastic - but the fee for taking out cash for a day’s worth of purchases might be cheaper than a 3% charge on each purchase with plastic.

The best advice I can give you is to invest some time preparing your finances before you leave.  Travel can be stressful enough without worrying about your money.

Being in the Silicon Valley during the current economic crisis has been interesting. It has been especially insightful to compare the “Dot Com” crash 8 years ago to the current crisis and to see how the crashes have effected businesses differently.

I was surprised to realize that many businesses, especially in the tech sector, learned from the mistakes of their ancestors. It has been this resilience that prompted me to put together a short list of ways small businesses can survive the current crisis - and even come out on top at the end.

1. Cash is King - Regardless of the size of your businesses, cash is going to be king over the next 18-36 months. Up to even a few weeks ago you could pretty much count on your local bank giving you a small business loan or being approved for a business-use credit card. Unfortunately, the liquidity of the market has “thickened” dramatically and has made those opportunities shrink to almost nothing. You’ll no longer be able to rely on loans and credit to get you through the month. From now on… cash should be your #1 priority.

2. Don’t Focus on Growth - This sounds like bad advice for any small business owner, but the truth is that many businesses are going to continue along the same growth pattern as before and find themselves beat to hell by the time they emerge from this crisis. This is the time when you need to hunker down and just wait out the storm. This will benefit you not only in the short term by ensuring you don’t go bankrupt, but will also put you in the perfect position to make strategic growth decisions after the crisis is over. For example, by keeping you expenses down and your cash account padded, you will be in a position to spend quickly right out of the gate - purchasing your competition or just beating them to key customers - because you have saved for what I like to call the “sunny” day.

3. Focus on Value - Since you’ll be cutting back on expenses, spend time on the things that don’t cost that much money but add value to your business. Instead of spending $10k replacing an old machine, spend $100 in phone charges to re-connect with your customers, or improve customer service. Invent new ways to add value to current products without spending a ton of money. That investment of time and energy will pay for itself 10x.

4. Collect - One of the things you can do to add value to your business and increase cash flow is by collecting on your accounts receivable. If there was ever a time to go after those delinquent customers… now is the time. If you don’t have an invoicing system in place there are tons of free and fee-based services out there - from PayPal to FreshBooks. You can even use Excel as long as you are actively trying to collect that cash.

5. Don’t Give in to Hoarding - During this time when “cash is king” you should avoid buying in bulk or otherwise stockpiling supplies or inventories. Although the parable of the ant and grasshopper might come to mind, now is not the time to be hoarding. That extra spending drives expenses up, depletes your cash reserve, and at the end of the day might be worth nothing. What good is a pallet of copy paper at a discount if you don’t have a business capable of using it. You will always be able to buy these items later even if you pass up a small discount now. That “savings” could prove disastrous to your cash flows.

6. Leverage Technology - There are tons of websites, web services, and other technologies that can help save you money. For example, trade in your $600 flight and $400 hotel for that sales trip to Chicago for an online meeting service instead. These days you can share a presentation, hold a conference call, or even converse via webcam - with nothing but a DSL modem and $50 a month for the services. You can also step up efforts to find better prices on products or services you normally use - by simply performing a simple Google search. Buying you your widgets from ABC Company for the past 5 years shouldn’t prevent you from searching for XYZ Corp who is offering the same widgets at 50% off.