Avoid This Common Money Mistake When Traveling Abroad

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Avoid fraud, save money, and earn rewards with this one simple change to the way you pay on vacation.

If you tend to reach for your debit card when paying for purchases, you're not alone. However, it might not be the wisest option, especially when you're traveling overseas.

Paying with a debit card while abroad leaves you vulnerable to fraud and paying unnecessary fees. Plus, you might be missing out on lucrative credit card rewards that could help pay for your next trip. Here are three reasons why you should reach for your credit card instead.

1. Credit cards minimize the risk of fraud

While both debit cardholders and credit cardholders can experience fraud, it's a lot easier to deal with when it's on your credit card.

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When someone gains access to your debit card, they gain access to your bank account -- and they can drain it. While there are protections in place that ensure you get your money back, you could end up spending weeks, or even months, trying to do so. And your bank account will be empty throughout that process.

On the other hand, when a thief gets your credit card information, they don't have access to your money at all. What they have access to is your credit card company's money. While their purchases will still show up on your credit card statement, you can deal with getting those charges reversed without worrying about your bank account being drained.

What's more, the Federal Trade Commission limits your liability as a credit cardholder to $50, and the best credit cards have a $0 liability guarantee. On the other hand, if you pay with an ATM or debit card, you could be held liable for up to $500 worth of charges -- or even more if you fail to report the fraudulent charges in a timely manner.

2. Debit cards are more likely to charge foreign transaction fees

If you're paying for purchases abroad with a debit card, there's a good chance you're paying foreign transaction fees on every dollar -- or euro -- you spend. While it is possible to find no-fee checking accounts that come with foreign-transcation-free ATM cards, most debit cards charge a 3% foreign transaction fee. That means that for every $1,000 you spend on your vacation, you're spending $30 on a needless fee.

Some credit cards also charge foreign transaction fees, but it's much easier to find credit cards that don't. For example, most travel credit cards don't have any foreign transaction fees. That's typically because they do charge an annual fee. However, the rewards you can earn while traveling will likely pay for that fee multiple times over.

3. With a credit card, you can earn big rewards while you travel

With the right travel rewards credit card, it's possible to earn enough rewards to travel for free with credit card points. Most travel credit cards offer big point bonuses on travel-related spending such as flight purchases, hotels, and transportation. Some even offer annual travel credits of up to $300.

If you spend a lot of money on travel, getting a travel credit card and collecting points is a no-brainer. Even if the card comes with an annual fee, it's possible to earn hundreds, or even thousands, of dollars in travel rewards each year simply by swiping your credit card instead of your debit card.

There's no reason not to use your credit card while traveling -- unless you don't have one. If that's the case, do your research and find the best credit card for your needs and spending habits, and then apply away. 

Keep in mind that you'll need to have good credit to qualify for most credit cards. If you don't, a secured credit card is a viable option for building and rebuilding credit. Many of these can be upgraded to a regular credit card after a series of on-time payments.

The most important thing is that you pay off your credit card bill in full and on time each month. If you end up in credit card debt, the cost of interest will greatly outweigh any benefit you can get from paying with credit.

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