Thanks to today’s technology, travellers are blessed with many different ways to pay for goods and services while exploring the world. You of course can use physical cash or credit cards, but then there is also the option to use debit cards, digital wallets, mobile payment apps, and prepaid travel cards.
Traveller’s checks were once another popular choice for international travel because they offered a secure way to carry funds without the need for cash but they have significantly declined in recent years due to not being as universally accepted as credit or debit cards.
Let us compare the top two forms of payment most travellers opt for which is cash and credit cards. The age-old debate between using credit cards or relying on cash for travel expenses continues to divide travellers seeking the most efficient, cost-effective, and secure payment method.
Both payment options have advantages and disadvantages, which may vary depending on where you’re travelling to. To help you decide what may be the best option for you, here are some main factors worth considering.
Card or Cash: What Should You Use While Travelling?
Research the Payment Culture
Factors such as technological infrastructure, financial systems, and cultural norms can influence the popularity and acceptance of various payment methods.
Cash is universally accepted and in many cultures it remains the primary form of payment for small transactions, markets, and street vendors. Many countries are still very cash-oriented. For example, in Vietnam or Morocco, most market vendors and shops won’t have card readers. Without taking cash, you may struggle to buy souvenirs or even basic food and drink. Cash is more commonly used in parts of Africa, Asia, and the Middle East.
In developed countries with well-established banking systems like those found in North America, Western Europe, and Australia, credit cards are more commonly accepted and used. Scandinavian countries are often at the forefront of technological advancements, and credit cards are widely accepted nearly everywhere. You’ll especially find it easy to pay via credit card in major tourist destinations around the world.
In some countries, you may have a more mixed situation in which some vendors only accept cash and others only accept card. Japan is a prime example of this where it pays to have both a card and cash on you: a lot of stores and restaurants are going cashless, but there are some temple entrances and small shops/restaurants that are still cash only.
Consider How Much Money You’ll Need
The amount of money you plan on spending while travelling can be a factor in determining whether to use a credit card or cash. Different situations may warrant different payment methods.
For small, everyday expenses like meals, local transportation, or souvenirs, using cash may be more practical. This can help you avoid transaction fees that might be associated with credit card use for minor purchases.
Carrying a lot of spending money around with you as your travel can be risky in terms of theft or loss but there may be times when you have to use a significant amount of cash due to unforeseen circumstances or because no other form of payment is accepted.
In cases such as these, if you haven’t packed a lot of cash with you, you can easily send money to Mexico or wherever you are visiting simply by going online, using a mobile app, or visiting a physical money transfer business in person where you may be able to get better currency conversion rates and low or no transfer rates. This is important if you require larger amounts of cash and want to save money.
For significant expenses such as hotel bills, flights, rental cars, expensive meals, or other major purchases, using a credit card may offer advantages and may be needed anyway to secure bookings. Credit cards often provide added security, and some offer travel insurance or other benefits.
If your credit card offers travel rewards, cashback, or other perks, using it for larger expenses can help you maximise those benefits. Credit cards often also provide competitive exchange rates, which can be advantageous for larger transactions.
Also keep in mind that you are often restricted when it comes to how much physical cash you can have on you when travelling. You must usually declare cash in both your home currency and foreign currency if the total value is over a certain amount when taking it in or out of countries.
Decide Which is More Secure
A lot of people don’t like carrying lots of cash, not only because it can be awkward to carry but also because it may make you a bigger target for thieves. This could be particularly a concern when visiting cities that are renowned for pickpocketing like Barcelona or Prague.
It may be possible to leave some cash in a hotel room, but that is assuming you have a reliable room safe. When backpacking and staying in hostels, you may find that you’re forced to carry all your cash with you for security reasons.
Having most of your money on a card could make you feel more secure. Of course, you can still have your card stolen, but it’s easier to protect yourself by cancelling your card if stolen, as many banks now allow you to do this easily via a phone call or from online apps on your phone.
Credit cards typically offer greater security perks than debit cards. Many have simple chargeback services that allow you to claim back money for fraudulent transactions. This could protect you if your card or card details are stolen.
ATM scams (including fake ATMs and card skimming devices) are common all around the world and are something to be wary of when choosing to how much money to carry on card and how much money to carry in cash.
The more often you have to visit a cashpoint, the more likely you are to be scammed. This is particularly true in dodgier parts of cities. This is why bringing a small amount of cash with plans to take out more when you’re there is not always a good strategy in cash-oriented countries. Instead, it may actually be better to take the full amount you need in cash, or plan cash pick-ups from secure locations.
If you do need to use an ATM, try to use ATMs inside banks and look out for signs of ATM hacking such as card slots that protrude or strange looking keypads.
Consider Foreign Transaction and Interest Fees
When deciding between using cash or credit cards while travelling, it’s crucial to consider foreign transaction fees and interest fees associated with each payment method. A potential downside of paying by card abroad is that you will usually have to pay a foreign transaction fee every time you use your card.
If you’re paying by credit card, you’ll also have interest fees on top of this. This can make a trip abroad a lot more expensive if you’re solely paying by plastic. Fortunately, there are many credit cards out there nowadays that are targeted at travellers. Some of these cards don’t require you to pay foreign transaction fees at all.
There’s also the option of pre-paid currency cards. These are debit cards that are topped up with the currency of that country before you leave. You can use them just like regular debit cards and you don’t pay foreign transaction fees every time you use them. Such cards are popular when travelling around Europe since you can top them up with Euros and use the card across Europe without having to pay any fees.
When it comes to taking cash, you have to pay a foreign transaction fee once, providing that you convert all the cash you need at the beginning of your trip. In some countries, you’ll get a better deal by transferring your money on arrival at the airport.
Then of course there are those countries that may accept other currencies without you having to convert to their currency. While the official currency in most countries is their national currency, some places may readily accept U.S. dollars or British pounds from foreign travellers, particularly in tourist areas.
For example, in some touristy areas of Turkey, it is common for vendors to accept payments in British pounds and Euros as well as Turkish Lira. Many Caribbean nations, especially those with a strong tourism industry, readily accept U.S. dollars alongside their own currency, as do Central American countries like Belize, Panama, and Costa Rica.
Other things to consider when it comes to fees include understanding that your bank may charge fees for using ATMs abroad. Additionally, the local ATM operator might impose charges. Be sure to check with your bank to understand these fees.
Some credit cards companies may offer to convert your travel purchases into your home currency using a process called Dynamic Currency Conversion. While this might seem convenient, it often comes with unfavourable exchange rates and additional fees.
Stay informed about current exchange rates to make more informed decisions when exchanging currency or using credit cards for transactions. Also, be sure to inform your bank about your travel plans before travelling, as this can help avoid potential issues with card transactions being flagged as suspicious.
So Should You Pay By Card Or Cash?
There’s no easy answer to this. The safest option is usually to bring a bit of both. Aim to bring more cash (80% of your spending money budget) and less money on card in countries which are still heavily cash-oriented. In countries where card payments are favoured, bring only a small amount of cash (20% of your spending money budget) and the remainder on card.
When it comes to using cards, opt for pre-paid currency cards or credit cards with international perks. When it comes to carrying large amounts of cash, consider putting some of this cash in a hotel safe when you arrive or plan a cash pickup instead of resorting to multiple ATM visits.
Recap of Advantages of Credit Cards vs. Cash
Advantages of Using Credit Cards
Security: Credit cards are generally more secure than carrying large amounts of cash. If your card is lost or stolen, you can report it and have it deactivated, reducing the risk of financial loss.
Convenience: Credit cards are widely accepted around the world, making them a convenient option for various transactions, including hotels, restaurants, and shopping.
Recordkeeping: Credit card statements provide a detailed record of your transactions, which can be useful for budgeting and expense tracking.
Currency Conversion: Credit cards often provide competitive exchange rates, and you don’t have to worry about exchanging currency in advance.
Rewards and Benefits: Many credit cards offer travel rewards, cashback, or other perks that can add value to your purchases.
Advantages of Using Cash
Acceptance in Remote Areas: In some remote or less developed areas, cash may be the only accepted form of payment. You may also get better deals from shops and market stalls when paying in cash.
Avoiding Fees: Some places may charge additional fees for credit card transactions. Using cash can help you avoid these fees.
Budgeting: Using cash can help you stick to a budget, as you have a tangible limit on your spending.
Anonymity: Cash transactions provide a level of anonymity, which can be a consideration for some travellers.
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