7 Things to Consider When Using Credit Cards Overseas

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credit card on mapI always use my credit cards when I am traveling internationally. They offer convenience, security, and protection that just isn’t available when using traveler’s checks or foreign currency.

In addition, I receive generous cash back and travel rewards of 2% or more every time I use my credit card.

Using a credit card when you travel internationally is a wise choice, but there are also many important factors you must consider when using credit cards in foreign countries.

Using Your Credit Card Abroad

1. Fraud Protection

Banks try to limit their losses from fraud by suspending accounts when a customer’s credit card is used in an unusual location. Your bank may interpret your charges on an exotic vacation as evidence that your card number has been stolen by an overseas hacker. It’s incredibly inconvenient to find out that a hold has been placed on your card while you are at a gas station or in a hotel lobby in a foreign country.

To avoid this possibility, notify credit card companies in advance of any foreign travel. Call the companies and inform them of your travel dates and all the countries that you are planning on visiting. The exception is American Express (a Money Crashers partner); they do not need to be notified about international travel plans.

  • Tip: When notifying a bank or credit card company about your travel plans, be sure to include any places where you have a stopover planned, even if you are just changing planes. If you miss your flight and need to spend the night somewhere that isn’t on your itinerary, the last thing you want is for your card to stop working. Moreover, by specifying where you’ll be, if someone ends up stealing your card and uses it in a different country, your bank will know something is wrong.

2. Acceptance

Some cards are more widely accepted around the world than others. Although Visa and MasterCard are equally accepted in the United States, I have found that some foreign merchants do not take MasterCard. American Express is widely accepted overseas, but just like in America, it is not always accepted. Discover and other cards have far smaller networks outside of the U.S. and probably won’t be a viable option when traveling internationally.

Remember, some businesses will only accept debit cards, the official currency for the country, or local checks. For example, many cut-rate grocery stores do not accept credit cards of any kind.

  • Tip: I like to travel with my Visa and my American Express cards, just to make sure I can make purchases wherever major credit cards are accepted.

3. Customer Service and Travel Assistance

Most cards offer a free travel assistance program. The program features might include travel accident insurance, purchase protection, and car rental loss or damage protection. In addition, many major credit cards offer additional protection including express shipping for replacement credit cards, legal assistance, and referrals to medical facilities. Services will vary, so learn what services are provided with your credit cards before you leave the country.

  • Tip: Your bank will provide you with a phone number that you can use to make a collect call from a foreign country. That number is usually on the back of the card. Store the number in a separate place so you can call the number if your card is lost or stolen. There may be special instructions for placing a collect call in the country where you are traveling. Check with your hotel concierge or look online for instructions for making a collect call before you place the call to your bank.

credit card numbers map

4. Foreign Transaction Fees

Many people don’t realize that the vast majority of credit cards charge a foreign transaction fee of 1-3% of the purchase price for every purchase that they make while traveling internationally. It is important to understand that these fees are not for currency conversion; transactions made abroad in United States Dollars are also subject to the fees. Although these fees are only supposed to be charged on transactions originating outside of the United States, some people claim that they have had foreign transaction fees charged for purchases made from home from foreign companies.

  • Tip: Comparison shop to find one of the few cards that do not have foreign transaction fees. If you are charged a fee for a home-based transaction, be sure to dispute the fee with your bank.

5. Dynamic Currency Conversion

It is becoming popular for merchants to offer to charge your credit card in dollars, a service known as dynamic currency conversion. The merchant may even boast that there is no conversion fee, but they will downplay the fact that you will be charged an exorbitant exchange rate.

The only advantage that this “service” offers is that the amount you are charged is displayed in U.S. Dollars. This may be slightly advantageous to a business traveler, who will find it easier to fill out an expense report in U.S. Dollars, but his or her employer will be charged for the dynamic currency conversion. The real beneficiaries of this service are the merchants; they receive a commission on each transaction processed.

  • Tip: Merchants who offer dynamic currency conversion are required to give their customers the option to turn it down. If a merchant presents this option to you, just say no. If they charge your card for a dynamic currency conversion without your permission, file a complaint for a refund through your credit card company.

6. Cash Advance Fees

If you are relying on your credit card to receive cash from an ATM, be aware that you will be charged a cash advance fee of 2-5%. In addition, you will also be charged a usage fee for using an ATM at a bank where you do not have an account. This will quickly add up, especially if you frequently use your credit card at ATMs.

  • Tip: Use your debit card at ATMs to avoid cash advance fees.

7. Cash Advance APR

On top of the cash advance fees, most credit cards charge a higher interest rate for cash advances than they do for purchases. While you can pay your balance in full every month to avoid paying interest, cash advances always start accruing interest from the moment the transaction is processed.

  • Tip: Only use your credit card for cash withdrawals as a last resort. Debit cards are much better for quick access to cash.

Final Word

Credit cards offer the convenience of a global payment network and the security of never having to pay for fraudulent charges. At the same time, banks always seem to be trying to impose as many fees as possible for travelers in foreign countries.

By taking the time to plan how you will use your credit card in foreign countries, you can ensure that that you receive all of the benefits of your credit card with none of the drawbacks.

Have you had problems using your credit cards when traveling internationally? What are some other things to watch out for?

  • gina

    Great article pointing out all of the potential problems with credit cards and debit cards when traveling. I feel like travelers checks are the cheapest and safest way to go.

    • Sally Aquire

      I’m inclined to agree with that. I don’t feel safe carrying lots of cash around but on the other hand, I’m loathe to use credit or debit cards.

      • Emily D.

        Depends where you go. I had a terrible time trying to get travelers checks cashed in China. I was told they were invalid because I had written on it- my signature that was required when I got them.

        • Sally Aquire

          It sounds like China is a bit problematic all round. As well as your comment, Winston has made a comment further down about China not always accepting plastic either so perhaps cash is the best option in that particular country.

        • Lamboferra

          I don’t know how long ago the previous post was written, but Discovercard works like a charm in china! No foreign trans.fee and very fair exchange rate. It’s affiliated with china unionpay so it’s accepted everywhere in china, more than any other types of cards. Best of all , the 5% bonus from discover is also included for purchases outside US.

  • http://madsaver.com Mac

    Last time I was out of the country was 10 years ago and I used credit cards wherever I went with little problem, and little fees. It’s too bad those days are over…going forward I would probably rely more on travelers checks to avoid all the hidden fees.

    • Sally Aquire

      Things have definitely changed for the worse. As I’ve just mentioned in my reply to Gina’s comment, I agree with the travelers checks option as it does seem the most sensible choice.

  • Karmella

    I too miss the days when these fees weren’t around. I hadn’t even thought of travelers checks – any chance of a post explaining why they’re a better option?

    I’m curious about the fees a retailer might charge – other than asking each one at the time of sale, are there any kind of guidelines as to what types of retailers or what areas of the world are more likely to add these fees?

    • Sally Aquire

      I’ll put that post idea forward for review so look out for it sometime soon if it’s approved!

      Re retailer fees, I’m not sure. I couldn’t find anything concrete when I was researching for this post so perhaps it’s at their discretion and isn’t put in place by all retailers.

  • Emily D.

    Another option for ATMs is to check with your bank and see if they have a partnership with banks in other countries. If so, you can use those ATMs with no extra fees. Also a lot of online banks have free ATM usage worldwide- they’ll reimburse all fees.

    • Sally Aquire

      That’s good to know about online banks. I wish I was with one now but sadly my bank is of the offline variety.

  • Winston C

    Thanks for pointing out these potential problems. I didn’t know before this that you can use your credit cards in foreign countries. However it is likely that I will be using cash because a lot of stores in China don’t accept plastics yet. It is going to be a while before they do.

  • dave

    If you try to use your card at an ATM and get a message telling you that the machine is out of money, keep track of it to make sure that your card is not charged anyway. Most travelers do not keep track. If you discover that you have been charged for a cash advance that you did not make you will have trouble getting the money back because the transaction has been processed through a long string of banks, and each one will claim that the error occurred somewhere else.
    I personally protect myself by using a bank that has branches all over the world, in my case with the exception of the US. I use it only in branches of the same bank.

  • David L

    I was in Thailand in Nov 2010 and ran into “Dynamic Currency Conversion.” I purposely used my Capital One Mastercard because they have no additional fees added on. The bill appears in dollars, not Thai Baht. One time, they rebilled me in baht, and another time the language barrier was to difficult to overcome. In addition, I attempted to contest the charges with Capital One. They would NOT simply adjust for the currency conversion.

    FYI, Cash is still king. My experience with travelers cheques is that the exchange rate is significantly worse than the cash exchange rate. I have seen hotels post two different rates: one for “bank notes” (aka money) and one for t/c (travellers cheques). Traveller cheques may be safe, but overseas, they are expensive to use.

  • Paul S

    This only works if you are NOT from Australia. Credit card companies here charge like wounded bulls at times up to 3% for using the card overseas. So we DO NOT use our cards overseas, prefering to use our debit cards because these cards do not attract such a high usage fee.

  • Paul S

    This only works if you are NOT from Australia. Credit card companies here charge like wounded bulls at times up to 3% for using the card overseas. So we DO NOT use our cards overseas, prefering to use our debit cards because these cards do not attract such a high usage fee.

  • Hudson

    Great feedback – What do you think of your bank automatically placing a travel note on your account when you book your travel plans online (ie – expedia, Priceline, etc)?