How to Protect Your Money and Avoid Unnecessary Costs While Traveling Overseas

by hedy on June 19, 2011

By Odysseas Papadimitriou, the CEO and founder of Card Hub, an online marketplace for a wide-variety of cards, including secured credit cards and the latest credit card deals.

Want a sip of water while traveling in Europe? It’s gonna cost you. Want to use the restroom in a train station? Put it on your tab. Taxis, restaurants, hotels, and airfare? Of course, you’ll be shelling out a lot of dough for those as well. In short, there’s no shortage of expenses associated with a trip overseas – some you might plan for and some you might be surprised by. One cost that sneaks up on many travelers is that which comes with using a credit card outside the U.S. The solution to this problem isn’t to simply stop using a credit card for overseas spending, however.

Why Use a Credit Card Abroad?

It’s not in your best interest to forgo overseas credit card use for a number of reasons, the first of which being that Visa and MasterCard – the two biggest credit card networks – automatically provide better exchange rates than you can get from your own bank or any currency exchange service overseas. At a time when it takes around 1.4 dollars to equal one Euro, that’s a pretty big plus.

In addition, credit cards are also much easier to keep track of than a stack of cash, which is helpful considering the threat of pickpocketing and the danger of losing access to money while in a foreign country. For example, in the worst-case scenario that your cash is lost or stolen, your money is gone. Whereas if your card is lost or stolen, you won’t be held liable for any unauthorized charges and a new card is only a call away.

What’s more, plastic is just plain easier to deal with. It doesn’t fill up your pockets or jingle around when you walk and it doesn’t require counting a whole bunch of foreign coins every time you want to buy something. It’s important to understand that we aren’t advocating that you travel abroad without any cash at all. However, limiting the amount you carry at any one time and making plastic your preferred means of spending is certainly the way to go.

Avoid Unnecessary Credit Card Costs

According to the Pew Charitable Trusts, a non-profit research group, 91% of bank-issued credit and debit cards charge 3% fees for each purchase processed overseas. To avoid them, simply use a no foreign fee credit card for any purchase you make overseas and any arrangements – such as airfare, hotels and daytrip reservations – made through foreign-based companies before you even embark. As long as you do so, using a credit card overseas will be no different than using one in the U.S.

The other main pitfall – known as dynamic currency conversion – is when overseas retailers offer to convert the cost of a purchase to American dollars, supposedly to make things easier for you, the customer. However, they really only do so to charge high exchange rates and pocket a sizeable profit. Luckily, like foreign transaction fees, dynamic currency conversion is easily avoidable. All you have to do is decline any merchant’s overture for price conversion and make sure to only sign for purchase totals expressed in the local currency.

What if My Credit Line is Too Low?

The above might all sound great, but what if your credit limit can’t support a trip abroad? In that case you should create a negative balance on your account right before departing, thereby effectively extending your limit. For example, if you have a $1,000 limit but you need $1,500 for your trip, make a payment that will bring your balance to -$500. Note that doing so might require sending a paper check as many companies will not allow such a practice online or over the phone.

Final Thoughts

The European Payments Council in late January passed a resolution that cleared the way for a restriction of magnetic swipe credit card use on the continent. However, this has yet to occur. I recently got back from an extensive trip to Europe and only once encountered a place where European chip-and-pin credit cards were required and American magnetic stripe credit cards were disallowed.

So, to sum it all up, make sure you have a no foreign fee credit card, notify your credit card company of your travel plans, only sign for purchases expressed in the local currency and make sure to have access to cash while using a credit card as your main spending vehicle.

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{ 2 comments… read them below or add one }

Dana June 23, 2011 at 2:46 am

Interesting tips to save our money by using credit card while traveling. From the article, it seems there is a lot of money saving if use this method.

Cate @ Pink Ritas & Lip Gloss July 26, 2011 at 1:53 pm

I agree! Before I traveled to Europe a few years ago I did my research and ended up with a Capital One card that has no transaction processing fees. The limit is fairly low compared to other cards ($3k vs. $24k) but luckily I tend to pay everything off in advance and just charge dining, souvenirs, and any other fee (museums, transportation, etc). For emergencies I bring my higher limit Visa and will just deal with the fee later.

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