Expat Boy: Going Abroad, What Card Do I Need?

Another post from Expat Boy:

Visa, it really is everywhere you want to be. Not all credit cards are created equal, especially when it comes to international travel. 

With few exceptions, the world is wired for the use of your credit card; the necessity of exchanging large amounts of cash, at the airport, ended several years ago. Due to a wide range of factors, the dollar’s global stature is down and its value can fluctuate broadly against other currencies. If you are risk adverse, one way to minimize wild currency valuation rides is to exchange large amounts of dollars for the local currency all at once. The problem with this strategy is you are now in possession of larges amounts of money, either at you hotel or on your personally. Another way to minimize currency valuations is to use your credit card. Credit cards afford travelers the ability to exchange only the exact amount of money needed and, add in some other important benefits.  

There are important features to look for when selecting a plastic-partner for traveling abroad. The most important feature to look for is a card with NO Foreign Transaction Fees is essential. Both my Capital One Cash Back and United Mileage Plus cards offer this. Foreign Transaction Fees can slowly eat through a travel budget. Ranging from as low as 1% to as high as 5%, foreign transaction fees are added to every credit and debit card purchase made abroad. Some debit cards add foreign transaction fees to cash withdrawn from ATMs. Saving $3,000 for a vacation and having about $100 (3% transaction fee) waster for the privilege of accessing money is nonsense.

A second important feature is how the financial institution issuing a credit card calculates currency exchange rates. Most, but not all, banks calculate the cost of foreign transactions in USD (US Dollars) at the best Interbank Exchange Rate of the day prior to when a transaction posted. If a bank’s currency exchange rate is varying from what Visa suggests, Foreign Transaction Fees, or some iteration thereof, are being charged.

Thirdly, if traveling in a ‘financial high risk’ area, a 1-800 number connected to a US customer service representative, not a call center, is essential.  Credit card companies are cracking down heavily on fraud, especially in China. Make one purchase in one of these high risk counties can result in a frozen card. Having a card frozen while abroad is no fun. This highlights an important reason why you needs to carry at least one spare credit cards. Debit cards are even more prone to being frozen, eaten by ATM machines or snapped in two pieces.

Finally, something to watch out for: a new and expanding type of foreign transaction is the Dynamic Currency Conversion, putting a foreign purchase into dollars at the point of sale. This option will always involve markups over the wholesale bank exchange rate of the day. When the option is available, decline this type of transaction and allow a bank to properly convert the purchase, not the merchant.

A credit card can be your best friend or your worst enemy when traveling aboard. A little work before you leave can help make the trip so much smoother.
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