While it’s easy to swipe your card in the United States, your purchasing ability might be limited overseas if you’re not prepared.
Planning for a vacation can be exciting—choosing a destination, scouting sightseeing opportunities, counting the days until takeoff—but financial planning should also be part of your pre-vacation ritual. Beyond budgeting for your trip, when traveling overseas you’ll also need to consider your best option for paying for foreign expenses. Depending on the type of card you use as well as your destination, credit cards may be your best option.
Why go plastic?
While you’ll likely need to rely on more than one form of payment no matter where you go, credit cards can be an attractive primary option because of the security they offer international travelers. If you’re traveling somewhere that theft is common, for example, credit cards can be canceled if stolen so that you aren’t liable for the charges. If you’re robbed while carrying cash, on the other hand, you’re out of luck. Using a credit card to pay for a foreign hotel or transportation also allows you to purchase travel or burglary insurance, which can refund money on your card if your train or flight is canceled or if something is stolen from your hotel room.
In addition to security, credit cards also offer favorable exchange rates, as issuers usually use an exchange rate that’s close to the current market rate. Keep in mind that the exchange rate for any credit card purchase is set on the day the purchase is processed rather than the day the purchase is made.
Ideally, you will be able to use the card you already have for international travel. However, depending on your card’s foreign transaction fees (a percentage that the credit card company charges you to convert foreign currency into U.S. dollars upon transaction), using your existing card may not be the best financial option.
It can be helpful to estimate how much you plan on spending on your card throughout your trip and figure out how much this will cost you in fees—for example, if you plan to spend $1,500 on your card during your trip with a 3 percent fee, it would cost you $45 in fees. If you choose to look into a no-fee card, you may end up paying that much in annual fees for the new card anyway.
However, if you plan to spend a significant amount on your card or if you travel abroad frequently, the fees can really add up and become a larger concern.
Some no-fee cards also offer hefty sign-up bonuses and rewards programs that can help you earn points on travel expenses. The most important thing is to consider your own situation and do thorough research before deciding which card will be best for you.
Beyond what using your card might cost you in fees, you’ll also need to consider whether your card will even function in another country. You should research which credit card brands are most widely accepted at your destination, and, if you’re traveling anywhere remote, if cards are accepted at all.
Beyond your credit card brand, the technology used by your card might present some usability problems as well. While the United States still uses magnetic stripe technology for virtually all its credit cards, many other parts of the world, including Canada and parts of Europe, Latin America and Asia, have switched to EMV technology. EMV, commonly known as “PIN and chip,” (cards contain an embedded chip rather than a magnetic stripe and users must enter a PIN to validate their orders rather than signing for them) helps reduce fraud by making it harder to steal card information.
While many foreign merchants still have the technology to accept American cards, either some will choose not to or simply won’t know how to process them. In addition, many foreign machines, such as automated ticket kiosks in train stations, will only accept PIN and chip cards, meaning you may have to wait in line for a cashier to process your ticket purchase. While it’s still possible to use your magnetic stripe cards in some places abroad, you should plan to have a backup payment method just in case.
Before takeoff, consider these tips for bringing your credit card abroad:
- You should always notify your bank before traveling overseas to avoid having your cards frozen.
- It can be helpful to bring two cards and store one in a hotel safe as a backup in case your other card is lost or stolen.
- Writing down your bank’s international, toll-free number before you leave the country can help in case you need to call to report a lost or stolen card.
- When using your card, you will likely be asked to show ID, so be sure to have your passport handy when making credit card purchases.
- Some merchants will offer to convert your transaction into dollars so you can see exactly how much you’re paying. While this may seem like a helpful offer, this practice (called dynamic currency conversion) gives merchants the opportunity to decide the exchange rate, and they’ll often make it higher than it needs to be to gain more of a profit. You should try to avoid being billed in dollars until you’re back in the United States.
- If you’re planning on using your credit card at a foreign ATM, keep in mind that this will likely go through as a cash advance, making it subject to immediate fees and interest rates upward of 20 percent. Unlike with a normal credit card purchase, there’s no grace period with a cash advance, so your interest will start accumulating right away. If you plan to use a foreign ATM, be sure to bring your ATM card with you as well.