Avoid Doing These 3 Things When Traveling With a Credit Card

by Elizabeth Aldrich | Jan. 31, 2019

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Traveling is costly. Here’s how to make sure you’re not spending even more than you need to. 

Woman holding a credit card and her cell phone while seated beside a backpack and travel hat,

Image source: Getty Images

Are you looking forward to your next vacation? Trip planning isn’t complete without a budget, which will probably include transportation, hotels, dining out, and sightseeing. What it shouldn’t include is paying excessive fees on your credit card purchases.

Unfortunately, many tourists end up making the mistake of paying way too many credit card fees while traveling abroad, and oftentimes, they don’t even realize it until they get home and see their bill. Luckily, avoiding fees while traveling with a credit card is easy once you learn the basics.

1. Foreign transaction fees can kill your travel budget

Chances are high that at least one of your credit cards charges you a fee every time you swipe and make a purchase while abroad. According to a CompareCards foreign transaction fee study, nearly half of all credit cards charge a foreign transaction fee for each purchase. These fees can add up, especially if you haven’t planned for them, so always check the terms and conditions of your preferred credit card.

Let’s say your vacation budget for a family of four is $4,000. Most major credit cards charge a 3% foreign transaction fee. That means you would spend $120 on foreign transaction fees alone -- money that could have been spent touring another museum or indulging at the city’s finest restaurant.

To avoid these fees altogether, choose a travel rewards credit card that has no foreign transaction fee. As an added perk, you’ll earn points and miles that can help you save money on your next vacation.

2. Avoid dynamic currency conversion

Have you ever had a merchant abroad ask you if you’d like to pay in the local currency or in dollars? Here’s a tip -- they’re not doing it to be helpful.

If you choose your home currency, the merchant then converts the purchase to the local currency. This service is called dynamic currency conversion (DCC). It may seem convenient or appear to provide a way to avoid paying a foreign transaction fee. Don’t be fooled. The merchant will rarely give you the market rate when it comes to converting the local currency to dollars, and you can be pretty certain their conversion rate won’t work out in your favor. This means that if you opt for the conversion, you could end up paying a noticeably higher price.

In addition, having the price converted to dollars doesn’t necessarily mean you’ll avoid a foreign transaction fee. Avoid this fee altogether by choosing the local currency anytime it is offered.

3. Cash advances should be reserved for emergencies only

It’s not uncommon to find yourself in need of some emergency cash while traveling. Sometimes your ATM card gets lost or you spend a little more than you anticipated. You might be tempted to take out a cash advance by using your credit card at an ATM in these situations, but you should think twice.

A cash advance is essentially a short-term loan from your credit card issuer, and these “loans” are expensive. In exchange for the convenience of cash, you’ll be charged a cash advance fee, and a significantly higher interest rate will be applied to the balance you withdrew. In addition, interest will start accruing as soon as the money exits the ATM.

Emergencies happen while traveling, so plan for them. Prepare for cash emergencies by bringing along a small emergency cash stash, opening a second ATM card, or having a friend or family member wire the money when needed.

What to look for in a travel credit card

Travel credit cards often have both travel benefits and lower fees associated with traveling abroad. Look for credit cards that do not charge foreign transaction fees, and if you can find a credit card without an annual fee, that’s even better. If an annual fee is included, choose one with rewards that will ultimately outweigh the cost of the annual fee.

Make traveling a little bit easier for you and your family by choosing a credit card that has additional travel perks. Many credit cards offer free airport lounges and priority status with airlines and hotels. Some even offer reimbursement for TSA PreCheck and Global Entry applications. Overlooked travel benefits like trip cancellation protection, rental car insurance, and delayed baggage protection can help you manage obstacles that inevitably arise while traveling. Making sure you understand the fees and hidden costs associated with using a credit card abroad -- as well as the potential rewards -- can save you hundreds of dollars on your next trip.

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As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.

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