When you’re planning a trip to another country, talking with someone who has recently visited your destination can be one of the best ways to gather intel on what to bring — and what to leave at home. It only stands to reason that when it comes to paying for purchases overseas, it helps to talk with a traveler who knows the ropes.
During the past two decades, Kathleen Peddicord has traveled to more than 50 countries. An American citizen, she still keeps financial ties to the U.S., and as publisher of Live And Invest Overseas, she educates Americans on how to live and retire all over the world. So she’s well acquainted with the ins and outs of using credit and debit cards when traveling abroad.
Here she shares five of her top tips for traveling with plastic, along with some traps to avoid.
1. Use the Right Card
While using a debit card helps you avoid the risk of overspending and returning home in debt, Peddicord recommends against using debit cards for purchases overseas “except as a last resort.” She says they are too easy to clone and if your cards are fraudulently used, “it takes time to get cash credited back to a debit card account,” she warns. “Meantime, you don’t have access to that cash. Use a credit card for all purchases and your debit card for ATM withdrawals only,” she suggests.
When you do get money from an ATM, examine it carefully to make sure there isn’t a skimmer attached. These devices steal card information, allowing crooks to make copies of a card and drain the account. Also be sure to take your card at the end of the transaction; older machines still keep the card until the transaction is completed, and it’s easy to walk away and forget your card, “leaving it in the machine waiting for someone to come along and grab it. This isn’t uncommon,” she says.
2. Watch Out for Fees
Before using a credit card overseas, find out if the issuer charges foreign transaction fees, which can add 2% to 4% to each purchase. Peddicord recommends using a card with no foreign transaction fees, such as Capital One or Barclays. Discover cards also do not carry foreign transaction fees and there are others. (Here are some of the best travel credit cards.)
If you plan to use a debit card to get cash at ATMs while you are on the road, check the financial institution’s fee schedule first. There may be three charges for using an ATM overseas: one for using an out-of-network ATM, another one for using your card overseas (similar to a foreign transaction fee), and still another may be charged by the owner of the ATM.
A few financial institutions don’t charge fees for using an out-of-network ATM. “Schwab credits you when you are charged a fee, automatically refunding any ATM fee you are charged when you don’t use one of its bank machines (PLC Bank),” Peddicord says. “Another bank that credits ATM fees is Everbank. This is an online bank with its only branches are in Florida.”
3. Bring Extra
Conventional wisdom says the only cards to bring when you travel are the ones you plan to use. But Peddicord recommends you bring two debit cards and three credit cards. Why? Because foreign purchases can trigger your financial institution to temporarily suspend your account privileges due to the risk of fraud. While letting your card issuer know of your travel plans in advance may help, in her experience, it’s not foolproof.
“Use your card once or twice at foreign locations, and your card carrier can (and likely will) flag the ‘non-pattern’ behavior and cut off your card,” she warns. “I’ve had three cards cut off over the course of a few hours on some trips,” she says. In order to reactivate those cards, she’s had to call the card issuers to verify that she was the one using them. That takes time, of course. Carrying extra cards ensures you have backups if you don’t have time to go through that process while trying to complete a purchase.
4. Spend Like a Local
When charging purchases abroad, you may have the option of paying in U.S. dollars instead of local currency. This is especially true in European destinations. This option is often referred to as “dynamic currency conversion,” and it’s almost always a more expensive choice.
“Opt for the local currency,” Peddicord recommends. “On one hand, the point-of-sale option for paying in U.S. dollars gives you the comfort of knowing what the U.S. dollar charge will be.” But you’ll usually save money by completing the purchase in local currency. “Generally speaking, you’ll get a better (exchange) rate from your credit card company (converting the currency for you) than you will from the vendor’s merchant processor,” she says.
She also notes that if your issuer charges foreign transaction fees, they apply to either type of purchase, so you won’t avoid them simply by choosing to pay in U.S. dollars.
5. Don’t Check Out
Just because you are on vacation, that’s no reason to relax when it comes to fraud. In fact, you want to be even more vigilant. Peddicord recommends checking balances online while traveling so if there is fraudulent activity on your cards, you find out about it quickly. (Of course, you only want to access financial accounts online if you have a secure internet connection; avoid logging in using a public WiFi hotspot. )
When you return it’s also not a bad idea to check your credit for suspicious activity. (One way to do that is to get a free credit report summary from Credit.com.) If a crook has been on a spending spree with your credit while you have been vacationing, you want to know as soon as you possible so you can stop future fraudulent use.
More Money-Saving Reads: