Save Money During Foreign Travel with Credit Cards

How often have you traveled abroad? How do you spend money there?

For many Americans, traveling and spending time in a foreign country is not a frequent occurrence. Therefore you really don’t think about how you’re going to spend money abroad until the last minute when the country you are going to does not accept US dollars.

So what’s the best way to spend US currency abroad? Logically, there’s only 3 ways: hard cold cash, a debit card transaction, or a credit card transaction. I’m going to walk through each option and show you that using credit cards is the best method ONLY if you use the right ones.

1) Cash is Most Reliable, but Inconvenient

Cash is King, but it is also an inconvenience. You probably know this because there is a very high likelihood that you don’t have a stack of bills in your wallet right now. Most of us have deferred to using Debit Cards to withdrawal cash as needed from ATMs, or simply charge with debit/credit cards only.

However, depending on the foreign country you visit, the vendors may not all be as tech savvy with debit/credit card readers. Instead, many places abroad are cash-only businesses. Thus, you’re going to have to show up with local currency in hand. There are essentially 2 practical ways to do thus without having to have a debit card.

Exchange for local currency before you travel

Before you go on your trip, visit your local bank and ask them if they can help you exchange USD into the local currency you need. This isn’t a very common service for banks, but they should have currency for most places. Moreover, their exchange rate should be close to the market rate. This approach allows you to have local cash on hand as soon as you step off your plane. This is handy for visiting under-developed countries because there is no guaranteed that you will have easy access to money exchange or ATM at the airport. Furthermore, the fees and exchange rates at the airport are typically outlandish!

Exchange for local currency

If you are in need of local cash exchange at your destination, try to avoid using the money exchange service at the airport. Not only do they charge terrible rates compared to the market, they also charge service fees on top of that. They get away with this typically because of the monopoly they have at the airport. If you’re forced to exchange money with them, plan to only do it once and avoid the adding up of fees.

2) Debit Card

Withdrawal local currency from an ATM

With a debit card, you gain the protection of not having to carry cash. However, there are some things to watch out for. Some of the largest ATM owners in the world have poor exchange rates–meaning their commission fee eats into your savings more than it should be you using a more market-aware ATM. Moreover, many debit cards charge an additional fee for withdrawing from an ATM. This fee can be as high as 3%. On top of that, ATM commissions eat into your money savings too! You want to avoid this!!!

Charge on your Debit Card with the Charles Schwab Debit Card

Here’s a great tip. The Charles Schwab Debit Card is the only debit card that allows you to withdraw money from an ATM without paying any fees. The most common fees are those imposed by your home bank when you take out money in a foreign currency and a fee charged by the ATM operator.

The Charles Schwab Debit Card is a debit card that does not charge any fees when used in foreign countries, and it reimburses all ATM costs charged by the ATM operator, allowing you to use ATMs in virtually any country. This also makes you more secure since you don’t have to withdraw a large amount of money all at once

The checking account is a great checking account and their investments are quite low on fees as well, therefore it’s recommended you keep at least some cash in their accounts as they are the only bank to provide this service that costs them money, so it’s best not to get it shut down.

3) Credit Cards

Many credit cards impose a 2-3% foreign transaction fee (FTF) when you use them outside of the United States. Even if the payment is made in USD and takes place outside of the country, you will be charged foreign transaction costs. As a result, having at least one no-foreign-transaction-fee card on hand can be of great help. Identify the credit cards you can choose from by separating no-annual-fee and annual fee cards.

No-Annual Fee Cards: The Capital One Quicksilver is the best no annual fee without a foreign transaction fee and the Bank of American Travel Rewards comes in a close second.

Annual Fee Cards: Almost all cards in this category that do not have foreign transaction fees, and most premium travel rewards cards provide no foreign transaction fees as a perk. Chase Sapphire Preferred/Reserve, Amex PRG, Citi ThankYou Premier/Prestige are three examples.

Don’t Forget Your Smart Chip!

Whether you are choosing to rely on a debit card or a credit card, don’t forget to enable smart chip on your card! The smart chip is the most prevalent worldwide. You can also ask for this feature on your new card if it’s not available by default.

Security smartchips were created in the 1980s as an alternative to magnetic strip swiping cards, which had been used since the 1950s. Smartchips offer superior security because the data is stored within the EMV chip on the card. Outside of the United States, most Western nations (including Europe, Canada, and Australia/New Zealand) have adopted chip and PIN terminals. This means your card must be inserted into the reader, rather than swiped. In order to complete a transaction without a PIN code, you simply tap or insert your walking.

In many parts of Europe, businesses are now refusing to handle strip cards. Because of the risk involved, the merchant does not want to be held responsible if your card is stolen. Furthermore, in my experience, many cashiers are unfamiliar with processing a strip card and may not know how to circumvent the system so that it can swipe. Asia is among the countries to have not yet embraced the smartchip cards. However, even if you are in an area where they are not common, it’s always a good idea to carry at least one of these cards with you.

Bottom Line

Travelling abroad is an exciting experience, but it can also be a costly one. In order to save money you should consider using cash or your debit card as opposed to credit cards that would charge you with foreign transaction fees.

On the other hand, credit cards are much safer, and getting a new card with no foreign transaction fees is definitely worth it. The best cards to have for your trip are debit cards or credit cards that don’t charge a foreign transaction fee and reimburse you for the ATM fees.

At any rate, be sure to check whether your card company charges international fees before using it abroad to avoid hidden fees. You don’t want to come back from a wonderful trip just to get smacked with unexpected charges! These tips should help you save a lot of money and enjoy your vacation in full!