Consider This Before Using Credit Cards Overseas

There are many mixed messages and theories on using your credit card while traveling. Here are the top 5 things to consider when using credit card overseas.

When traveling, whether overseas or domestically, one of the inevitable questions that get raised is what to do with your holiday money. Many of us are not comfortable carrying all the vacation money around with us. This is heightened when traveling overseas and foreign currency needs to be considered. How much money to take with you and where to convert it inevitably gets asked.

One solution to this is using your credit card. It’s highly portable and relatively secure, at least compared to carrying wads of cash. Also, it means you don’t need to over commit when converting money. Depending on which card company you are with, they will often use the bank’s conversion rate, which is usually the best. However, it is certainly not without its pitfalls. Read on for some fundamental traveling tips on using credit cards overseas.

Using Credit Cards Overseas

There are a large amount of mixed messages and theories on if and when you should use your credit card while traveling. The ability to make purchases overseas when required, the security of having it as a backup, the interest free period, and in some cases the travel insurance it sometimes offers makes a credit card a vital commodity to a traveler.

Of course one of the great things about having credit cards when traveling is they are often accepted worldwide and you can usually find a place that accepts them wherever you go. This means you don’t have to carry around as much foreign currency. Imagine going on a multi-country cruise and having to decide how much of each type of money to carry.

However, while it can be potentially invaluable to travelers, using a credit card overseas can turn into ball and chain if not used correctly.

Money Pouches


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Top 5 things to consider when using your credit card overseas

How should I use my credit card while traveling? Here are the top 5 things to consider when using your credit card overseas.

The Conversion Fee
This is the fee that the bank charges when converting your money into another currency. Even though there is convenience in using your credit card overseas, the bank may charge you around 2.25% of the transaction when converting into foreign money.

The Cash Advance Fee
One of the biggest benefits of using a credit card is being able to get cash out in any country. Sometimes it is useful to be able to take out a cash advance with your credit overseas. Even though you are in a foreign country you can wander over to a cash machine and all of a sudden have foreign currency. However, naturally there’s a catch. Be careful: Each time you take cash out you pay a “cash advance” fee. This can be a flat rate charge, such as $5 per transaction. This is on top of the 2.25% or so fee you have already been charged for the conversion fee.

The Interest
Another factor people like about credit cards is that there is a period of time before they start charging interest, often “up to” 55 days. Therefore, you can have nearly two months’ interest free for purchases on your vacation.. However, this most definitely is not extended to your cash advances. Any of the bank’s money (your line of credit) that you take as cash accumulates interest immediately. This is calculated and compounds daily, usually at a high rate.

Your Current Balance before Taking Cash Out
While you won’t pay the cash advance interest on your retail purchases, you will not stop accumulating it on your cash advance until you pay off your entire balance at the time of the cash advance. For example, if you make purchases that take your account to -$500, and you take out an additional $100 in cash, you will pay the daily interest only on the $100, but you won’t stop paying it until you pay off the whole $600.

The Date You Make the Purchase
Check the date before you make a new purchase and take note of the dates of your credit card cycles. If your account isn’t a zero balance or better on the due date, you start accumulating interest on the current balance and any new transactions you make.