Should You Use Your Credit Card Overseas?

Plastic is convenient, but make sure to follow these tips.

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Today’s guest post comes from Odysseas Papadimitriou, founder and chief executive officer of Evolution Finance, which is the parent company for Wallet Blog and Card Hub.

A credit card is one of the best ways to make purchases while traveling overseas. They offer favorable exchange rates and the convenience of not having to carry around large amounts of cash. If you’re using a credit card while traveling, you’ll never have to worry about withdrawing too little money for your trip or getting stuck with excess foreign currency because you withdrew too much. While these factors make credit cards an obvious choice, there are a few things you should know before you try to use your credit card off home turf. Below we offer a step-by-step guide on how to ensure you get the most out of your credit card at the lowest cost while traveling abroad.

[See The Fine Print Behind Credit Card Rewards]

The first thing you need to decide is which card to take with you. For this, you should consider what cards are accepted in the countries where you’re traveling and investigate which credit cards offer the lowest foreign transaction fees.

The credit cards most accepted worldwide, by a large margin, are on the Visa and MasterCard networks. So in most cases, you’ll want to carry a card on one of these two major networks. The least useful card overseas is a Discover card, as it is less frequently accepted outside the United States.

In terms of foreign transaction fees, most credit card companies will charge a fee between 2 and 3 percent of the transaction amount every time you make a purchase abroad. Some issuers, Capital One in particular, offer credit cards that do not charge the customer any foreign transaction fees. It may be worth applying for a no foreign transaction fee credit card at least two weeks before you leave for your trip.

After you’ve decided on the card or cards you’re going to take, your next step is to call your credit card issuer to notify them of your travel plans. You want to give them notice so that they don’t suspend your credit card account due to suspicious charges made outside of the country.

Once you’re on your trip, there are a few things you want to be aware of in terms of how and when you use your credit card. The first thing you should watch out for is a consumer trap involving currency conversion on your credit card transactions. Often times, merchants will ask you if you’d like to convert your transaction from the local currency to U.S. dollars. This is called Dynamic Currency Conversion and although it may sound appealing, you should refuse it. Merchants use this technique as a way to make extra money, converting currency at rates as high as 7 percent and pocketing the difference.

You should therefore always check your receipt to make sure the amount is NOT in dollars. If you do see a dollar amount, ask the storeowner to re-do the transaction in the local currency. If they tell you that the conversion is automatic, it’s worth disputing and reporting them to the credit card network (i.e. VISA, MasterCard, AmEx) of the card you tried to use.

[See Fraud Protection: Debit Versus Credit Cards]

If you plan on traveling in Western Europe, you will notice that many countries have adopted chip-and-PIN technology for their credit and debit cards. These are high-security smart cards with embedded microchips. Almost all U.S. credit cards have a magnetic stripe as opposed to this technology, so some merchants are wary of accepting the U.S. “swipe and sign” method since it is less secure. According to Visa and MasterCard guidelines, all stores that display their logos must also accept magnetic stripe credit cards. However, you need to carry your passport with you at all times, or it is very likely that they will not accept your card.

Something else to be aware of while you’re traveling, and even when using your card in the U.S., is that merchants cannot refuse your card based on a minimum dollar amount. Visa and MasterCard’s policies prohibit merchants from establishing rules on minimum transaction amounts, meaning that if they accept Visa and MasterCard in their store, they cannot refuse to accept your card based on the amount you would like to purchase.

The benefits listed above clearly make credit cards the best payment method while traveling abroad. In addition to favorable exchange rates and convenience, credit cards offer perks particularly appealing to travelers, such as rewards in the form of airline miles and points for hotels. So pack your bags, bring your best credit card, and enjoy your trip!