You're probably used to using your credit card when shopping or eating out locally, especially if you're accustomed to earning rewards such as cash back, miles or points. But now that you're ready to travel internationally, you may feel a little less confident about your normal shopping habits. Will you be charged foreign transaction fees every time you use your credit card internationally, and chip away at your vacation budget? What if your card gets declined? And isn't it easier to just pay cash anyway?
Cash may work for incidental expenses such as tipping, but you may still want to use a credit card with no foreign transaction fees for hotel, car rental, and other large expenses. That's because paying for purchases using a credit card with no foreign transaction fees while traveling overseas can help you save money, maximize rewards, track spending, and more. But before you board, research your credit card options for international travel carefully, because not every credit card offers comparable benefits.
1. Compare Cash to Credit for Overseas Spending
Currency exchange fees can affect your spending power when you travel overseas – especially if you're likely to spend more because your trip will last for an extended period of time or if you're visiting an expensive destination. Your credit card can make spending convenient for most purchases and it may help you avoid foreign transaction fees too.
In case you want to keep cash on hand for smaller expenses, it pays to plan ahead. Your bank may be able to exchange U.S. dollars for foreign cash, but you should plan the swap several business days in advance of your departure.
Your bank may not have the currency you need if you seek an exchange at the last minute. You may also be required to pay a fee to make the exchange. Because this fee is often a percentage of the amount you wish to convert, exchanging a large sum could cost more than you planned to spend. If you use a credit card with no foreign transaction fees to make purchases while traveling overseas, you could save on these fees and possibly earn rewards from those purchases at the same time.
Other options include currency exchanges at airports and hotel kiosks, and making withdrawals at an ATM. But while these locations offer speed and convenience, they may be more expensive than the bank. Pay attention to the advertised fees, and limit transactions at these locations – especially if credit cards are commonly used at your destination.
2. Managing Foreign Transaction Fees
When it comes to international purchases and travel, the benefits offered by credit cards vary greatly. The credit card you count on at home for its amazing cash back rewards might not be the best option for your upcoming overseas adventure. Before you use your credit card internationally, understand if your credit card issuer applies foreign transaction fees. These fees are usually 1% to 3% of your transaction. If your issuer charges these fees, you will wind up paying more for your purchases and those fees could add up fast if you plan to use your credit card for your hotel or car rental.
How do you know whether your credit card charges foreign transaction fees and, if so, how much? Check the terms and conditions of your credit card online or call your card issuer and ask. If your credit card charges foreign transaction fees, consider applying for a travel rewards credit card that does not charge these fees.
3. Understand Payment Methods and Fraud Protection
When using your credit card internationally, it’s a good idea to learn about the complexities and risks involved. Chip technology can make your life easier, and informing your issuer prior to travel can avoid fraud alerts.
Using Chip Technology Abroad
Many card issuers have transitioned customers to chip-enabled credit cards. This technology is typically more secure than using a magnetic stripe for your card, since chips create unique keys for each transaction that cannot be used again.
American consumers may still be getting used to dipping or tapping their chip-enabled cards instead of swiping. In Europe and elsewhere, however, shoppers have been doing this (and possibly entering a PIN) for years. You'll need to make sure your credit card has a chip before you travel overseas, since foreign checkout clerks may not know what to do with a mag-stripe card.
Remember, though, that even if you have a chip-enabled card, it may still be beneficial to always keep local currency with you. In some cases, unattended payment kiosks in locations such as parking garages or toll booths may not accept credit cards.
Inform Your Issuer Before Traveling Internationally
You should also be prepared in the event a merchant declines your credit card. If this occurs, you have plenty of available credit, and your account is otherwise in good standing, then fraud protection may be the cause. Credit card companies are always on the lookout for potential fraud in order to protect their customers. This can make it tricky to use a credit card internationally. If you normally make in-person transactions in Louisville and it's your first visit to London, you could experience a declined transaction – and even a locked account. Call your credit card issuer, contact them online or use a mobile app in advance of your international journey to help prevent inconvenience and embarrassment. You may be able to avoid unnecessary disruptions by alerting your credit card issuer of your travel plans, whether abroad or domestically.
Downloading your issuer’s mobile app before traveling internationally is also a good idea. This could make it easier to contact the credit card company in the event of an issue.
It also can't hurt to verify that locals at your destination use credit cards regularly, especially if you're traveling off the beaten path. In the event that the card does get lost or stolen, the Citi® Quick Lock feature on the Citi Mobile® App or Citi® Online instantly blocks new purchases and cash advances while allowing recurring transactions, payments, balance transfers, and credits to continue without disruption. You can unlock it just as easily if the card is retrieved.
4. Carry More Than One Credit Card for Overseas Travel
While at home, you can often get away with just one credit card in your wallet. When traveling internationally, this could lead to issues. Certain vendors overseas may not accept all the card networks you’re used to seeing at home. A pair of credit cards also come in handy if one of them is lost or stolen.
While it can be helpful to take more than one credit card when traveling internationally, limiting the number of cards you bring could save the trouble of reporting multiple credit cards stolen if you get robbed. Taking only a few cards may also cut down on the amount of time you’ll need to inform issuers about your intentions of using credit cards internationally.
5. Avoid Dynamic Currency Conversion
When making a purchase with your credit card in a foreign country, some merchants offer the option of dynamic currency conversion to pay in U.S. dollars rather than in the local currency.
While it may seem convenient to use dynamic currency conversion at first, the merchant’s service provider often charges more for this service than if you paid for the purchase on your credit card in the local currency. Furthermore, although you pay in U.S. dollars with dynamic currency conversion, your credit card is being used to make purchases outside the U.S., so you typically would still be charged any foreign transaction fees that apply on your credit card.
For these reasons, it can be significantly more expensive to use dynamic currency conversion for purchases abroad. Dynamic currency conversion should always be optional, though, and you can decline it whenever it is offered by a vendor.
If you want to avoid higher charges while using your credit card abroad, it’s generally recommended that you choose to pay in the local currency instead of using a merchant’s dynamic currency conversion and, if you can, use a credit card with no foreign transaction fees.
6. Earning Rewards on Overseas Credit Card Spending
Are you excited to use your credit card overseas because you're anticipating earning plenty of rewards? Read the terms and conditions before you go, as your credit card issuer may only award points, cash back, or miles for domestic spending.
7. Check Your Credit Card Perks for Traveling Internationally
In the excitement of planning an overseas trip it's easy to forget other ways your credit card might help you. Access to members-only airport lounges and early boarding may be some of the amenities that can help you relax at the same time. Before using a credit card internationally, be sure to check the perks your card offers so you can enjoy the most benefits possible. The Citi®/ AAdvantage® Executive World Elite Mastercard® even offers a statement credit up to $100 every 4 years for your application for Global Entry or TSA PreCheck®.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.