Using credit cards instead of travelers’ checks or cash has become a way of life for most modern-day travelers. Credit cards are much more convenient to use when travelling, and safer than cash. Unlike cash, which is gone forever if lost or stolen, if someone makes off with your credit cards, you can always put a hold on your account.
Credit cards may seem perfect for foreign travel, but is there a downside? Here are four common drawbacks to consider before deciding on using your credit cards overseas, and tips for how to deal with these.
Drawback #1: Currency exchange fees. Since your credit card is based on the U.S. Dollar and you’re making purchases in the currency of the country where you’re travelling, your credit card company will be converting the local currency to dollars. While this is a great convenience, you pay a hefty fee for this service. The typical currency exchange fee charged by most credit card companies is 3%, including hotel stays, rental car, and so on, when charged in the country you’re visiting. In short, using your credit card for your overseas expenses is like taking out a cash advance, which also comes with a 3% fee. Most people avoid taking out too much in cash advances, because that 3% fee can quickly add up.
Solution: Pay large expenses ahead of time by booking and paying for hotel rooms and rental cars online. In addition, bring the money you’ll need in different forms, including cash, travelers’ checks, and credit cards.
Drawback #2: Greater Risk of Fraud and Theft. Fraud happens in the U.S. as well, but in many overseas countries you do face a greater chance of falling victim to fraud or having your wallet stolen. Your credit card information can get stolen even if you don’t lose your card; an unethical shopkeeper can electronically skim your credit card number and information when you make purchases and then start making fraudulent purchases with your card.
Solution: Follow the usual precautions for keeping your valuables safe. In addition, never let your credit card out of sight. If in a restaurant, don’t give your card to the waiter, but rather follow him or her to the point-of-sale machine and watch the waiter swipe the card. While some credit card information can be skimmed electronically, the three-digit security code on the back of the card has to be written down for the card information to be complete. By not giving away your card, you can protect yourself against fraudsters making off with your complete card information.
Drawback #3. Account Freezes. If your card is lost or your account information stolen, your credit card issuer will freeze your account. This protects you against fraudulent charges to your account, but unfortunately, it also locks you out of the account. Your card issuer could even freeze the account if they suddenly see a lot of overseas charges on the account (made by you), and the card issuer can’t reach you to confirm that the charges are legitimate.
If your account is frozen and you have no access to other sources of money, you could quickly find yourself in a heap of trouble. You may not be able to buy food, pay for your hotel room or leave the country until you get the situation worked out.
Solution: If you’re planning on using your credit cards overseas, let your card issuers know ahead of time. Find out what your options are if your card or card information is lost or stolen during your travels. In case of card loss or theft, major credit card issuers, such as MasterCard or Visa, can typically issue a new credit card and deliver it to your hotel or location in the country where you’re staying. This saves you from being stranded in a foreign land without access to money. Get the contact information for your card issuer’s emergency department before you leave, so you’ll have it on hand should something go awry.
