5 Factors to Consider When Using a Credit Card Overseas

Credit cards are an easy way to pay when in a foreign country, but there are five downsides to consider before you leave for vacation.

As summer rolls in, many are getting the suitcases out and preparing for vacation. For those going overseas they can enjoy exotic locations, historical sites and foreign currency exchange.

For some travelers using a credit card seems like the obvious answer. They don’t have to worry about traveler’s checks or exchange rates, and many credit cards offer bonuses for use. You could be paying for your dinner and earning airline miles or a complimentary hotel stay for your next vacation.

But as with almost anything, travelers should beware. There are five downsides to consider when using your credit card in a foreign country, according to Money Crashers.

When your credit card is being used in an unusual location, charges during your exotic vacation will be seen as evidence that your card number has been stolen by an overseas hacker. If the bank suspects fraud it will put a hold on your card in order to limit its own losses.

You can avoid this inconvenience by calling your credit card companies in advance and informing them of your travel dates and all the countries that you are planning to visit. The exception is American Express; they do not need to be notified about international travel plans.

Some cards are more widely accepted around the world than others. Discover card in particular isn’t the best choice for international travel because it has a smaller network outside of the U.S. And some businesses will only accept debit cards, the official currency for the country, or local checks, so you may still have to care another payment option besides for a credit card.

Many people don’t realize that the vast majority of credit cards charge a foreign transaction fee of 1% to 3% of every purchase made while traveling internationally. You can shop around to find one of the few cards that do not have foreign transaction fees if you often use your card abroad.

Dynamic currency conversion is a service where merchants offer to charge your credit card in dollars, which will display the amount you were charged in dollars instead of the foreign currency. However, you will be charged an exorbitant exchange rate, which mostly benefits the merchant. When this option is offered, the traveler is in his or her right to turn it down.

Withdrawing cash from an ATM with your credit card will cause you to be charged a cash advance fee of 2% to 5% in addition to the usage fee for using an ATM at a bank where you do not have an account. It’s better to use a debit card at the ATMs.

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

1. Fraud Protection2. Acceptance3. Foreign Transaction Fees4. Dynamic Currency Conversion5. Cash Advance