This is the era where everything is being digitized. The same goes for money. Plastic money, such as debit and credit cards are vastly used in the market. Carrying cards is convenient as it is a hassle to always carry a large amount of cash with oneself, especially on trips to a foreign country. However, the easy thing is not always the right thing to do.
If you are planning to travel abroad, it would be a prudent decision to carry some cash along with your credit cards. A credit card might be the convenient way of paying but it is not always safe to use a credit card when in a foreign country. This article will discuss the dangers of using credit cards while on a foreign trip and the safer alternatives that you can use.
Using a credit card in a foreign country has the following downsides:
1. Cash Advance Fees
If you use your credit card on a foreign ATM, you should be aware of the fact that most banks charge a cash advance fee of 2-5% in the case of foreign usages. So, every time you withdraw money, you lose a percentage of your balance to the bank, adding up to quite a significant loss. You can avoid incurring this loss if you carry cash from home. In case you do not have any cash, use your debit card to withdraw money from the ATMs. Debit cards are not charged with cash advance fees. Therefore, you would not suffer any losses.
2. Cash Advances APR
Other than cash advance fees, you will also be charged with cash advances APR(Annual Percentage Rate) if you use credit cards to withdraw money while overseas. In the case of most banks, the interest charges of cash withdrawals are higher than purchases. Right after the transaction is made, cash advances start accruing interest. Hence, using a credit card to withdraw money on foreign soil will only lead to you losing unnecessary balance. Again, you can avoid any such loss altogether. Just carry cash or use debit cards to make withdrawals. Do not use a credit card for anything other than in an emergency.
3. Cases of Fraud
While using a credit card on a foreign trip, you have to be extremely careful and alert in order to avoid fraud cases. Your credit card can be especially vulnerable to being hacked when you are using it for purchases and withdrawals overseas. To prevent this, banks have now started to immediately freeze accounts when they notice any suspicious overseas activity. They will perceive your foreign purchase as a fraudulent activity conducted by a foreign hacker and instantly suspend all account activities. If that is the case, you would be stranded in a foreign country, completely cut off from your money sources. To avoid any such trouble, you could notify your bank beforehand of your travel plans and the exact locations where you would visit so that they would know that it is you who is using the card.
4. Dynamic Currency Conversion
Banks charge for your international credit card usage in dollars. This particular service is commonly known as dynamic currency conversion. While this might come in handy for frequently traveling business people, the ordinary tourists would be paying conversion fees for no reason at all. Your bank is legally obligated to offer you the option to turn down dynamic currency conversion. So, you can easily make a choice.
5. Acceptance of Credit Card
Most credit cards are accepted throughout the globe. Usually, Visa Cards and MasterCard are accepted almost everywhere but there are always exceptions. Some do not even accept credit cards while some only take debit cards or the official currency of the country. If this would be the case, then your credit card would be rendered completely useless. To avoid such hassle, just carry cash and debit cards, which you can pay with, in case your credit card is not being accepted.
These are the situations that you might have to face while carrying a credit card in a foreign country. However, that does not mean that you cannot carry a credit card on a foreign trip at all. Carry your credit card, use it for purchases and withdrawals, and utilize all the advantages that a credit card has to offer. However, be careful of all the downsides of credit card usage, as mentioned in this article. Take the necessary precautions to avoid any monetary loss or hassle. With proper planning, your trip will go smoothly.
Nikitha is working as a senior analyst at MyMoneySouq a one stop to find personal loans, credit cards, etc.