You're probably used to using your credit card when shopping or dining locally, especially if you're accustomed to earning rewards such as cash back, miles or points. But if you're traveling internationally for the first time, 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 your hotel, car rental and other large expenses. That's because paying for purchases using a credit card with no foreign transaction fees while traveling can help you save money, earn points and track spending. But before you board, research your credit card options for international travel carefully, because not every credit card offers the same benefits.
Here are 6 things to keep in mind if you're thinking of using a credit card abroad.
1. Compare cash to credit for overseas spending
Your credit card can make spending convenient during a trip – particularly a long one – because you won’t have to withdraw and carry as much cash, and you’re not liable for unauthorized charges.
If you want to keep cash on hand for smaller expenses or vendors who don’t accept credit cards, it pays to plan ahead. Your bank may be able to exchange U.S. dollars for foreign cash, and it may end up costing you less than using an ATM or exchanging money at your destination. Check to see whether your bank charges a fee for currency exchange. While it can help to have some cash when you travel, it may be more cost-effective to pay with a credit card, particularly if you have a credit card that does not charge foreign transaction fees.
Other options for getting cash include currency exchanges at airports and hotel kiosks, and making withdrawals at an ATM. While these locations may offer speed and convenience, they may be more expensive than your bank. Pay attention to the fees, and consider limiting transactions at these locations – especially if credit cards are commonly accepted at your destination.
2. Managing foreign transaction fees
When it comes to making purchases abroad, credit cards benefits can vary. 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 whether you’ll be charged foreign transaction fees. These fees are usually 1%-3% of your transaction. While that might not seem like a lot, those fees could add up fast if you plan to use your credit card for big ticket items like 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 using a credit card that does not charge these fees. Plenty of travel rewards cards don't charge foreign transaction fees.
3. Understand payment methods and fraud protection
When using your credit card internationally, there are a few practical things to keep in mind. Chip technology can make your life easier, and informing your issuer prior to travel can help you avoid fraud alerts.
Using chip technology abroad
Many credit 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 other places, however, shoppers have been doing this (and possibly entering a PIN) for years. Fortunately, most credit cards now come with chip technology.
Inform your issuer before traveling internationally
Credit card companies are always on the lookout for potential fraud to protect their customers. This can sometimes 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 let them know you’ll be traveling. This can prevent the inconvenience of having your card declined.
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.
4. Carry More Than One Credit Card for Overseas Travel
Close to home, you can often get away with just one credit card in your wallet. When traveling internationally, you might want to bring two or more. Certain vendors overseas may not accept all the card networks you’re used to using at home. Having several credit cards can also come in handy if one of them is lost or stolen.
On the other hand, 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 lost or stolen if that happens. 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 another country, some merchants offer the option of dynamic currency conversion. This lets you see the conversion and pay in U.S. dollars rather than in the local currency if you choose.
While dynamic currency conversion may seem convenient, 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. The exchange rate is also generally less favorable. And, paying in U.S. dollars with dynamic currency conversion typically can’t help you avoid foreign transaction fees that would normally apply, since you’re still using your credit card to make purchases outside the U.S.
For these reasons, it can be more expensive to use dynamic currency conversion for purchases abroad. Fortunately, dynamic currency conversion is optional; you can decline it and choose to pay in the local currency.
6. Check your credit card benefits 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 on your way to your destination. Before using a credit card internationally, be sure to check the benefits your card offers so you can enjoy them. The Citi®/ AAdvantage® Executive World Elite Mastercard® even offers a statement credit up to $120 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.
