Traveler's Test

Using Your Credit Card When Traveling Overseas – Terms, Fees & More!

Using Your Credit Card When Traveling Overseas – Terms, Fees & More!

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The introduction of the first-ever internationally accepted charge card in 1953 has revolutionized oversea travel for people around the world. But credit cards have drastically evolved since the debut of Diners Club International, and they are now offering cardholders a level of security and convenience that cash and debit cards simply can’t match. 

And yet, using your credit card while traveling abroad might not be so straightforward and, without the right preparation, you might see your vacation budget being depleted by high fees, declined transactions, and unexpectedly high exchange rates. Here’s what you need to know for a stress-free trip overseas!

Using Your Card Abroad: Know Your Terms and Conditions

According to recent estimates, the percentage of declined credit card transactions varies between 4.5% and 7.5%, depending on the card issuer. But these percentages are nothing compared to the volume of declined foreign payments! 

After all, credit card providers are always monitoring account activities looking for signs of abuse or fraud. And, a transaction attempted thousands of miles away from your hometown can be easily interpreted as fraudulent activity – which may trigger your issuer into blocking or suspending your card. 

Luckily, there is a simple and efficient way to reduce the chances that your credit card gets declined while abroad: inform your issuer of your travel plans. Before setting off on your trip overseas, check your card issuer’s website or get in touch with their customer service to know what you need to do to prepare for the upcoming journey. 

Some of the key factors to check include:

  • Whether you should inform your issuer of your travel plans
  • What contact number you can use if a problem arises with your credit card while abroad
  • What countries and locations outside the US accept your credit card

Fees and Costs of Using Your Credit Card Abroad (and How To Avoid Them)

When using your card abroad, it is vital to understand the fees and costs you’ll face each time you withdraw money from an ATM or pay with your credit card – and get to grips with convenient exchange rates. 

To prevent fees from eating into your vacation budget, make sure your current credit card offers suitable terms, or apply for a different credit card online with no foreign transaction fees and great exchange rates. 

Foreign Transaction Fee

Foreign transaction fees vary between 1% and 3% – but some can be as high as 8%! This means that, on average, you’ll pay $10-$30 (or even $80!) in fees for every $1000 spent, which can significantly inflate your expenses. 

Luckily, this pitfall is easily avoidable by reviewing your current card’s terms or choosing one of the many credit card issuers who offer no foreign transaction fees and no extra charges for ATM withdrawals.  

Dynamic Currency Conversion

When paying with your credit card abroad or withdrawing cash, you’ll notice that POS machines and ATM screens will give you two options: making the purchase in your home country’s currency (i.e.: US Dollars) or using the local currency. 

While the first option might seem more convenient at first, you’ll be using the currency exchange rate of the local bank, which is often uncompetitive. Oppositely, when opting to pay in the local currency, you’ll use the exchange rate of your card issuer or bank, which is usually more favorable. 

Pro tip – get an understanding of local currency before your trip and how it compares to US Dollars (or your home country’s currency) for an easier payment experience. 

Tips for Using Your Credit Card When Traveling Overseas

If you have ticked all the boxes above and you feel confident using your card abroad, you can now enjoy all the benefits of credit card purchases, including consumer protection options and free travel perks such as air miles, free nights, and discounts. 

Here are some extra tips to make the most of your credit card purchases:

  • Choose a widely-accepted issuer (i.e.: Visa, MasterCard, and American Express)
  • Have a chip-and-PIN card at hand as not all countries will accept electronic payments such as Apple Pay. 
  • Store some cash (and a copy of your passport) in a separate location, as a backup in the case your wallet gets stolen 
  • Carry more than one card to avoid issues if one is suspended
  • Check your credit card statements as soon as your return home

Time to take off and enjoy the unique benefits that using a credit card while abroad can offer!