There are many ways to make purchases while traveling abroad. You can convert your home currency into local cash, wire money, use a debit card or prepaid travel card, or look into traveler’s checks if you want to go old school (and can still find a company that issues them!).
Most travelers, however, will opt for the easiest and often most economical way to pay for things which is with credit cards.
While it’s always a good idea to have a variety of ways to access your cash while traveling, credit cards will most likely be your go-to when paying for food, transport, admission tickets, and souvenirs. If you plan on using a credit the next time you travel internationally, here are a few important things you should know.
Things to Know about International Credit Card Payments
Research Your Payment Options
Most of us spend a great deal of time searching for the best prices on flights and hotels, but how often do you set time aside to really research what payment options will provide you with the best conversion rates and lowest fees when making international purchases.
When used correctly, credit cards can be one of the most economical and safest ways to make purchases while travelling and my following tips will help you maximize the effectiveness of using them.
Where You Can Use Credit Cards Internationally
The first step to using a credit card overseas is to get one. To qualify or get approved for a credit card, you usually have to be able to prove a minimum annual income or have a decent credit history.
Your credit card limit will often be quite low until you work up a positive history of making repayments. After you get a credit card or cards, you can then start using them to make purchases internationally since most countries accept them as payment.
There are some exceptions where you may not be able to use a credit card in certain countries and this usually occurs when a country has been targeted by economic or trade sanctions. Countries where you may not be able to use your credit card include nations like Sudan, North Korea, Iran, and Cuba.
It also pays to carry credit cards that are affiliated with a brand that is widely accepted internationally at most outlets that take credit cards like Visa or Mastercard. You may find that many businesses abroad don’t accept American Express for example.
Retailers worldwide use the best payment processing providers in order to seamlessly and securely accepting your credit card payments when you visit their physical store or online store via a computer or smartphone.
Who each retailer selects for their credit card payment processing needs is important to you the consumer because it will determine if they can accept payment via EMV chip cards or NFC contactless payments like Apple Pay.
Having the right processing provider also means businesses such as food trucks or market vendors can offer a wireless point of sale system to be able to accept your credit card and print you a receipt on-the-spot instead of restricting you to pay with cash.
Navigating Credit Card Fees
There can be hidden fees to watch out for when using credit cards while traveling internationally. The first way to avoid fees is to seek out credit cards with zero foreign transaction fees.
This means you will not be charged a percentage for each and every purchase you make internationally, which averages around the 2% to 3% mark. Note that you can also get hit with foreign transaction fees by shopping online with an international merchant and you are using a credit card that doesn’t offer zero foreign transaction fees.
The next important thing to always remember is to pay in the local currency if and when prompted. You never want to pay in your home country’s currency unless you want to pay a fee called a Dynamic Currency Conversion charge which could result in an additional 3% added to your purchase.
A DCC charge may allow you to make a point-of-sale credit card purchase in your home currency and show you exactly what that rate will be so there isn’t any surprises, but the real surprise is that you will almost always pay more than if you would have simply paid in the local currency and let your credit card convert the currency for you.
The conversion rate your credit card provides you with constantly changes to reflect the current conversion rates and the rate you received for each purchase can be viewed or calculated by looking at your statement. Paying in your home currency allows the conversion rate to be determined by the merchant and not by your credit card company.
Credit card companies generally offer a pretty favorable currency conversion rate and ones like Visa and MasterCard have currency converter calculators on their website to give you an indication of the rate you are likely to receive when using the card at that present time.
Using a Credit Card at ATM’s
If you are thinking of using your credit card to withdraw cash while traveling internationally, you may want to rethink that plan unless you want to throw away a bunch of money on fees. It’s much better to use a debit card to access cash from foreign ATMs rather than opting for your credit card.
Using a credit card to access cash from foreign ATMs will result in cash advance fees which can be a flat rate or percentage. You will also immediately get hit with interest rate charges that could be over 20% depending on the card.
Seek out ATMs that are affiliated with your bank (part of their ATM network) to avoid getting hit by two rounds of ATM fees charged both by your bank and the local bank.
Always choose an ATM in a secure location, since ones found in dodgy areas run a greater risk of having credit card skimmers installed on them by criminals which could then steal your card details.
And lastly, you will also want to seek out a credit card with no annual fee. That being said, some cards with hefty annual fees do reimburse you so to speak with monetary bonuses or travel credits which can offset any annual fee.
You will also want to seek out a card with a good interest rate unless you always plan to pay off your monthly statements in full which with then see you never paying any interest at all.
Benefits of Using Credit Cards
There are many benefits to using credit cards for international purchases. Many offer incentives such as collecting reward points or airline miles for every dollar you spend.
You can then redeem these points or miles for hotels stays or flights. Some cards even offer very generous sign-up bonuses that may gift you with a large number of airline miles or hotel points you can instantly use to book free travel.
Some high-end travel cards also come with complimentary international travel insurance which can come to your rescue if you require overseas medical treatment, experience travel delays, lose bags, or experience other covered travel mishaps.
Some cards might also grant you access to specific airport lounges which will score you comfort, Wi-Fi, complimentary drinks, and free food. Some cards will provide you with a set number of lounge visits per year while others offer unlimited use. A good example of this is American Express and its Priority Pass lounges privileges.
Using credit cards avoids having to carry large amounts of cash which could then be lost or stolen. You also don’t have to worry about foreign banks or currency conversion places not accepting your home country’s money due to it being wrinkled, marked, or damaged in some way.
Some places can be very picky when it comes to what notes they will accept and they may need to be crisp in order to be accepted and exchanged for local currency.
Credit cards also come with a number of security features which comes in handy when traveling abroad. There’s often fraud detection, CHIP security features, and online protection.
Credit cards with zero liability policies mean that any fraudulent transactions will be refunded. If your card is lost or stolen, you can simply call the emergency international number that is listed on the back of your card to get them to lock your account and reissue you a new card which can often be sent to you internationally at no cost in an expedited manner.
When you make a credit card purchase, the payment processor receives the details and reviews the purchase for potential fraud before forwarding the transaction on to your credit card company or bank. Once verified, the merchant you are making a purchase from receives an approval so the transaction can be completed.
If there are security problems, the transaction will be declined.
Making international purchases can often trigger a decline notice since your credit card company may think it suspicions that a purchase is being made far from where you normally live.
This is why it is important to notify your credit card company of your travel plans including destinations and dates so they can place a note on your account which will hopefully prevent purchases you make with your credit card while travelling from being declined.
Make sure your credit card has a security PIN in place before you travel as not all foreign merchants will accept a signature to authorize your purchase. You will also want to make sure your cards won’t expire while you’re traveling.
You may want to take more than one card in case you run into problems using one and keep them in different locations in case your wallet or purse is lost or stolen. It’s always a good idea to have a second form of payment such as cash in case credit card processors are offline or a merchant doesn’t accept credit cards.
Paying Credit Card Bills Online
And lastly, another bonus of using credit cards is the ease of being able to pay your statements online. Set up an account before you travel if you have not already done so.
This will allow you to access your accounts so you can monitor purchases for fraud and keep track of your travel spending so you can be sure to stay within your budget. Accessing your credit card accounts online will ensure you can pay your monthly statements on time to avoid incurring late payment penalties.
If you pay off your statements in full, you will avoid having to pay interest charges. If you are worried about forgetting to make a payment, you can choose to set up automatic payments to ensure your monthly credit card payments are paid on time.
This is a good option if you think you may not have access to internet to pay your bill via computer or mobile. Alternatively, you can call your credit card company to make a payment by phone.
Another option some travelers choose to do is to add funds to their credit card before they commence their travels so as to better budget themselves. Doing this trick equates to you having a positive balance which then transforms your credit card basically into a debit card and avoids the risk of not paying your bill on time or incurring interest charges.
It’s important to note that not all card providers allow you to do this or may limit how much of a positive balance you can have, so it always pays to read up on the specifics that relate to your card.
I hope I have been able to shed some light on how you can use credit cards more effectively when traveling and making purchases internationally.
When used correctly, credit cards are a safe and economic way to make purchases abroad and can often reward you with perks such as free travel which I think all of us will happily accept.