The following is a guest post from Odysseas Papadimitriou, CEO and Founder of CardHub.com, who has offered to share his expertise on using credit cards overseas.
So rubber just hit asphalt, and your plane has arrived in your foreign destination. You manage to fight through the crowds at baggage claim and not lose your mind going through customs. After all the travel and hassle you are more than ready to set off exploring on your exotic vacation or get to your hotel in order to prepare for that first big meeting on your business trip’s itinerary.
But wait, how are you going to pay for the cab or buy a loved one that souvenir? All you have in your pocket is a few American dollars. Do you really feel like seeking out a decent currency exchange rate? Probably not.
So why not use a credit card? Such a course of action is, perhaps, not the first option considered by many travelers, but maybe it should be. Using credit cards for overseas purchases rescues travelers from the headaches associated with currency exchange—favorable rates, determining just the right amount to convert so as to have sufficient funds but not be stuck with what might as well be Monopoly money upon returning home—and provides the security of not being at the whim of those quick-handed foreign pick-pockets.
Still, there are a number of notable traps of which a plastic-wielding voyager must be aware.
First, the Foreign Transaction Fee:
Credit card agreements often have associated fees of 2-3% of any purchase made abroad, which create unfavorable disparities between an item’s listed price and what actually shows up on a credit card statement. The informed traveler should inquire as to the existence of such fees on his or her credit card and even consider applying for a no Foreign Exchange Fee credit card before embarking.
Second, Dynamic Currency Conversion:
Imagine your relief when a foreign merchant offers to convert the terms of your purchase from the local currency to the familiar U.S. dollar. What a convenience, right? Wrong. Merchants offer this “service” while inflating exchange rates as much as 7% to line their pockets, not to be kind. To avoid paying a premium for familiarity, simply refuse any offers to have the terms of a sale converted and only sign receipts that represent purchases in the local currency.
In addition to watching out for these troublesome fees, travelers should make sure that their credit card network will be accepted at their destination. Visa and MasterCard are the most universally accepted networks, while American Express’ acceptance rate is a function of the country in question’s development. Discover, on the other hand, is rarely accepted outside of the United States.
If you are traveling to Europe, passport identification may also be required with every purchase because of the differences in credit card security measures used in Europe and the U.S. (many European countries use chip-and-PIN technology, employing smartcards that verify accounts automatically with a PIN while U.S. cards merely have magnetic security strips).
Finally, make sure to notify your credit card provider of your travel plans so it does not suspend your account because of suspicious activity.
In case that information was as overwhelming as arrival at a foreign airport, here’s a quick checklist:
- Make sure you have a Visa or MasterCard without Foreign Transaction Fees
- Notify your credit card company of your travel plans
- Remember to have your passport when making purchases
- Refuse offers for currency exchange when making purchases; only sign receipts that show amounts in terms of the local currency
Ultimately, it is your choice as a traveler whether or not you heed this advice. Imagine for a second, however, that you don’t. Say you visited Pairs; it’s nice this time of year. You saw the Eiffel Tower, visited The Louvre and even got a poster of the Mona Lisa for your mom and a burette for your sister. Flash forward to after your trip. You come home from a long day at work. Oh, there’s the mail. Look, a credit card bill; I bet nostalgia is kicking in right about now. Hold on, there must be some sort of mistake! Why is the bill for 10% more than it should be? The answer: Foreign Transaction Fees and Dynamic Currency Conversion! Should have listened when you had the chance!
This guest post comes from Odysseas Papadimitriou, CEO and Founder of CardHub.com, an online marketplace for credit card offers.