We are now in the peak season for travel abroad to popular destinations such as Europe. In the past, paying with travelers checks was de rigueur when traveling overseas, but these days they’re overshadowed by credit cards and ATM machines. Should you use cash or cards when paying for purchases overseas?
Should you use cash?
Typically, the cheapest method to pay for purchases is by obtaining the foreign currency at your local bank. This is due to the high likelihood that you’ll be able to exchange money at wholesale currency rates, with minimal if any fees charged. This compares to changing currency at the airport or another retail location, in which they charge a very high convenience fee. For instance, exchanging American Dollars for Euros at the wholesale rate of $1.31 compares to the retail rate of $1.50 Dollars for every one Euro. This .15 to .20 spread can certainly add up. If you do decide to exchange money at a retail location such as a Travelex, be sure to understand that any waived foreign transaction fee for changing large amounts of money is still embedded in the foreign currency rate they offer.
Please also note that if you withdraw from an ATM machine, make sure you find out the fee because they can be high and above the amount listed on the machine since it is an international withdrawal. In most places you’ll want to have local currency on hand for small purchases, or to use at places where credit cards aren’t accepted.
The main drawback for bringing a lot of foreign currency on hand is the lack of security. You’ll be traveling in a foreign country where tourists being targeted by pickpocketers isn’t all that uncommon. If you do decide to travel with a lot of cash, keep some in your pocket and the remaining amount in a safe in your hotel. Most hotels provide this feature for travelers visiting from abroad.
Are there any costs if I use my credit card or debit abroad?
Many banks charge fees for the purchases you make or the money you withdraw from your account when you are abroad. When you call your financial institutions to notify them that you’ll be traveling abroad, ask about the foreign transaction fees they charge. It’s not uncommon to be charged up to 3 percent of the purchase price. But certain cards carry no foreign transaction fees. If you don’t have a lot of cash on hand, using cards for large purchases can be very convenient and relatively cost effective since you’ll get the wholesale rate. As far as whether you should use a debit or credit card, we recommend the latter. Credit cards provide more security against fraud as there isn’t direct access to your cash account at your bank as is the case with a debit card.
What is the best credit card to use when traveling abroad?
The credit card you use to make purchases matters. Capital One, Discover and American Express Platinum cardholders are not charged a foreign transaction fee. Regular American Express cardholders are charged a 2.7% fee and then Chase, Citi, Bank Of America, Barclaycard, HSBC, Wells Fargo and US Bank all charge a 3% fee.
Notify your bank or credit card issuer of your travel plans
Otherwise they might suddenly start seeing charges from London and Lisbon popping up, and shut down access to your account, fearing it’s a matter of fraud.
More Questions? Browse answers or ask your finance questions online. Also, you can explore our tax research services online.
Related Articles
->Don’t Forget Your VAT Tax Refund When Traveling Overseas
->Lower Your Data Roaming Charges While Traveling Abroad
->When Should I Purchase My Airplane Ticket For 2013 Travel?
->The Real Costs For Using Frequent Flyer Miles Are Rising
->Review Your Auto Insurance Policy When Planning Your Next Roadtrip
->Saving Money on Gas with Credit Cards
