Minimizing Bank Fees Overseas

I just spent time in London and Paris, and I was hit with a $10.22 fee at an ATM at Heathrow Airport and a fee of $3.85 to $5.71 per transaction every time I used an ATM in Paris. How do I avoid or minimize these fees on my next trip? —M.X.S., Washington, D.C.

The charges likely included a fee for using an ATM at a foreign bank as well as a currency-conversion fee, which can run 1% to 3%. If your bank has overseas branches, you can generally avoid the international ATM fee—but not the conversion fee—by using its ATMs while traveling. (Citibank has a Web tool and a mobile app that let you locate its ATMs worldwide.)

If not, find out whether your bank is in a network that waives the ATM fee at member banks abroad. Bank of America, for example, is part of the Global ATM Alliance, whose members include Barclays United Kingdom, BNP Paribas France and Deutsche Bank Germany. And some banks reimburse all ATM fees, including international fees. Among them are Schwab Bank and Fidelity Cash Management accounts.

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To avoid conversion fees on credit cards, you’ll need to choose the right card. American Express, Chase and Citibank have eliminated the fee from some of their premier-level cards, says Bill Hardekopf, of LowCards.com, and Capital One does not charge a fee at all. Fees vary, so find out what your credit card issuer or bank charges before your trip.

Also, notify your bank or credit card issuer that you’ll be traveling. Bank fraud departments may freeze your account if they can’t reach you to ask about charges in a location that’s not part of your usual pattern.

Eligible expenses for a 529 plan

My mother-in-law has a 529 plan for my son. He is living in a rental house off-campus with three other students. Can she use the 529 plan to pay for his portion of the rent, food and utilities? —Brendy Medina, Kings Park, N.Y.

If he’s enrolled at least half-time in a degree program, room and board qualify as eligible expenses even if he’s living off-campus. Contact the college’s financial-aid office to get the off-campus room-and-board figure, which can be different from the amount listed on the college’s Web site for on-campus students. (Ask for the number the college reports to the Department of Education as part of the cost of attendance.) Utilities and other reasonable living costs can be included, says Joe Hurley, of SavingforCollege.com, as long as the total doesn’t exceed the school’s official room-and-board figure.

Old credit cards

Over the past 25 years, my husband and I have acquired more than 20 credit cards, including several very old gas and department-store cards that we rarely use anymore. We pay all of our balances on time and have excellent credit. I would like to acquire a new card that offers a good reward program for airline miles and has a $20,000 credit limit. Will closing some of these old credit card accounts hurt our credit score? —S.L., Denver

You do need to be careful before closing any old credit cards because a major component of your credit score is based on how much of your available credit you’ve used (called your credit utilization ratio). Whenever you close an account, you lower the combined credit limit on your cards, which could make it look as if you’re closer to maxing out your available credit.

Retail store cards and gasoline cards count in the credit utilization ratio, but their limits tend to be much lower than those of all-purpose credit cards, so their impact on your utilization ratio is smaller, says John Ulzheimer, president of consumer education at SmartCredit.com. “Normally, you’d be eliminating a credit limit of a few hundred dollars, maybe slightly more, and not $10,000 or $20,000,” he says. He recommends waiting until you receive the new card in the mail before closing any of the old accounts so the new $20,000 limit can be added to your utilization ratio before the other limits are subtracted.

And don’t worry that closing old accounts could affect the length of your credit history, which is a common misconception, says Ulzheimer. “The age of the account still counts in your score, even if it’s closed,” he says. “If you choose to close a credit card, you should focus on the credit limit, not the age of the card.” (For more on credit scores, see Lowdown.)

Extra liability coverage

My wife, 18-year-old son and I have a multicar insurance policy with a $300,000 liability limit. My son drives one of our cars daily, but the title is in his mother’s name. Are we financially liable beyond the $300,000 if my son causes an accident? And would it make a difference if the car were titled and registered in his name? —A.S., via e-mail

You could be on the hook for any damages above $300,000 if your son—or anyone in your family—causes a major accident. That is a good reason to boost the liability limits on your car insurance, especially if you have a teenage driver, and to consider buying an umbrella policy. With umbrella coverage, you can add $1 million or more to your auto and homeowners liability coverage, generally for $200 to $400 per year.

If the car were titled in your son’s name, he could get his own insurance, which should limit your liability. But it can be very expensive for an 18-year-old male to buy auto insurance coverage on his own; it’s usually less expensive to keep family coverage with a multicar discount.

Maximum Social Security benefits

My wife and I are about to retire. We’re both 66. Is there a combined maximum that the Social Security system will pay to a household? If not, how do each of us qualify separately for the maximum amount? —R.H., Tulsa, Okla.

Your Social Security benefits are calculated based on your highest 35 years of earnings or half of your spouse’s benefits—whichever is higher—if you retire at full retirement age (currently 66). For a worker retiring at age 66 in 2012, the maximum benefit is currently $2,513 per month. If both you and your spouse earned the maximum amount that counts every year ($110,100 in 2012, but just $16,500 in 1977), you could each receive the maximum monthly benefits.

Taking benefits earlier or later affects the payout amounts. Anyone may take benefits as early as age 62, but the monthly payouts will be reduced by as much as 25% for the rest of your life. Or you can delay taking benefits beyond your full retirement age, which boosts your annual payout by 8% for each year you delay, until age 70. If you live longer than the average life expectancy, you’ll end up with a lot more money by delaying your benefits (average life expectancy for a 66-year-old is 84 years for a man and 86 for a woman).

For more information about Social Security, see the Retirement Planner.