When traveling abroad,cash is definitely a viable option. Almost every merchant on the planet accepts local currencies for standard transactions.
However, it’s a mistake to finance your entire trip with paper money:
- Cash is easily lost or stolen — and can’t be replaced.
- Carrying large amounts of money makes you an easy target for thieves.
- Value could be lost every time you convert from one currency to another.
- You also lose money every time you withdraw cash from an ATM that’s not in your bank’s network.
This is why experienced travelers take their credit cards with them. Doing so helps them avoid many of the above drawbacks. Plus, traveling with plastic offers numerous benefits as you’ll see below.
However, relying exclusively on credit cards also has certain disadvantages, as well.
Let’s look at some of the pros and cons of using a credit card when traveling abroad.
The downside of credit cards when traveling
Probably the most important hurdle is that some smaller international merchants operate cash-only businesses. Street vendors, concession stands, and even some taxis all fall into this category. Your Visa and Mastercard may be useless for these types of transactions.
Here are some additional strikes against cards:
- Many merchantsdoaccept credit cards, but they only take EMV chip cards. If you only have a magstripe card with you, you may not be able to buy anything at all.
- Some merchants may only accept EMV chip cards that are issued by local banks.
- Some credit cards charge a foreign transaction fee for each purchase made abroad. It’s usually around 3 percent; however, you can avoid these fees by shopping around for better offers.1
- Some credit card transactions require ID verification. This means you’ll need to carry your passport with you at all times, but this is a good idea anyway.
Now let’s look at some of the major benefits of card-based transactions when traveling.
The upside of using credit cards abroad
All of the following assumes that you have a chip-enabled EMV credit card. As already mentioned, older magnetic strip cards don’t work abroad in most cases.
Here are the primary benefits of using your credit card as much as possible:
- Plastic is more convenient. You don’t have to carry as much money or change currencies as often. This is ideal for larger purchases like flights and hotels.
- Unlike cash, credit cards provide fraud protection. For starters, most international merchantsrequireEMV chip cards, which are automatically more secure than their magstripe counterparts. Though many card-issuing banks also provide liability coverage and the ability to cancel your card if it’s stolen.
- Depending on your bank, it’s possible to earn rewards. These are points that you can apply to yournextbig trip.
- Credit cards typically provide better exchange rates than what you’ll get from ATM machines and currency stands.
- Depending on your card issuer, your purchases might automatically qualify for insurance. This coverage doesn’t simply apply to consumer goods — it also covers travel delays and lost luggage.
One final travel tip before you go abroad
Before you go, it’s important to call your card-issuing bank in advance and let it know about your travel plans. Otherwise, your credit card could get flagged for suspicious activity.
In the event you don’t contact your bank prior to your departure and your card does get declined, your card-issuing bank might simplysuspendthe account. Although in some cases, your credit card could be canceled completely. It’s very difficult to ship a replacement when you’re on the other side of the world.
Safe travels.
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1 “What is a foreign transaction fee?” Creditcards.com, 23 December 2019
Additional Source: “Pros and Cons of Traveling With a Credit Card,” The Travel, 15 July 2019
Topics: Insights, Payments & processing
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As a seasoned traveler and financial enthusiast with extensive expertise in international transactions and payment methods, I can provide valuable insights into the concepts discussed in the article about using cash versus credit cards when traveling abroad.
1. Cash as a Viable Option:
- Local Currency Acceptance: Virtually all merchants globally accept local currencies for standard transactions.
- Risks of Carrying Cash: Cash is susceptible to loss or theft, and once lost, it cannot be replaced.
2. Drawbacks of Relying on Cash:
- Security Concerns: Carrying large amounts of cash makes travelers vulnerable to theft.
- Currency Conversion Costs: Value may be lost when converting from one currency to another.
- ATM Withdrawal Fees: Withdrawing cash from ATMs outside your bank's network incurs additional costs.
3. Advantages of Credit Cards:
- Convenience: Credit cards reduce the need to carry large amounts of cash and eliminate frequent currency exchanges.
- Fraud Protection: EMV chip-enabled credit cards enhance security, and card-issuing banks often provide fraud protection and liability coverage.
- Rewards: Some credit cards offer rewards, such as points, which can be applied to future travel expenses.
- Exchange Rates: Credit cards generally provide better exchange rates compared to ATMs and currency exchange stands.
- Additional Benefits: Depending on the card issuer, purchases may qualify for insurance coverage, including travel-related benefits.
4. Downsides of Credit Card Usage Abroad:
- Limited Acceptance: Some smaller international merchants operate cash-only businesses, and certain transactions may require EMV chip cards issued by local banks.
- Foreign Transaction Fees: Some credit cards impose fees for purchases made abroad, typically around 3%, though shopping around can help find better offers.
- ID Verification: Certain credit card transactions may require ID verification, necessitating the need to carry a passport at all times.
5. Travel Tips for Credit Card Usage:
- Informing the Bank: Before traveling, it's crucial to inform the card-issuing bank about the travel plans to prevent the card from being flagged for suspicious activity or even suspended.
In conclusion, the decision between cash and credit cards depends on various factors, and a well-informed traveler would consider the advantages and disadvantages of each payment method based on the destination, type of transactions, and personal preferences.
