Tourism is expensive. Why else would cities and countries fight so hard to host events like the Super Bowl, the Final Four, the Olympics and the World Cup? Though these events cost a lot in infrastructure, planning and security, they also boost local economies thanks to increased business at local hotels, restaurants and shops. Thus, whether we realize it or not, a majority of our travel expenses are incurred through transactions with merchants in our destinations. This is true whether you book hotels and day trips before departing or are simply shopping and dining upon arrival. Therefore, you might ask yourself, what is the best way to pay all of these merchants? Is it cash? Is it traveler's checks? Is it a credit card?

TUTORIAL: Credit Cards

While you'll always need some cash, primarily using a credit card for all of your spending needs can significantly simplify overseas travel. Armed with a credit card, you won't really have to deal with converting currency, which means no more worries about converting just the right amount of money, and you will automatically get one of the lowest conversion rates possible. In addition, pick pockets will be less of a threat not only because credit cards are easier to conceal and keep safe but also because even if your card is stolen, you won't actually lose money. Just report your card missing and you'll be off the hook for any unauthorized purchases.

Still, the act of simply using a credit card does not in itself make overseas spending cheaper. You must follow four simple tips in order to truly make that goal a reality. (For more help on smart travel, see Travel Smart By Planning How You'll Pay.)

Before Departure

Tip 1: Get a No Foreign Transaction Fee Credit Card
According to a recent study conducted by The Pew Charitable Trusts, a nonprofit dedicated to informing the public, 91% of bank cards and 57% of credit union cards have fees for transactions made aboard. These fees typically range from 2-3% of each purchase and can therefore result in you paying significantly more than the listed price of anything you purchase overseas.

Therefore, before you depart, check your credit and debit card agreements to see if they include such fees. If they do, apply for a no foreign transaction fee credit card as well as a debit card that does not charge extra for ATM withdrawals in other countries. Such spending vehicles are becoming increasingly popular, but Capital One remains the top issuer of credit cards sans foreign transaction fees. (To help with your search, check out How To Read Loan And Credit Card Agreements.)

Tip 2: Call Your Credit Card Issuer Before Leaving
Once you have the requisite cards, alert your issuer of your travel plans and ask for the number that you can call collect for assistance while overseas. This will not only ensure that your cards do not get suspended because of suspicious activity but will also give you a way to contact your issuer free of charge if something comes up. (To learn about more advantages of using a credit card, see Credit Card Perks You Never Knew You Had.)

While Abroad

Tip 3: Avoid Dynamic Currency Conversion
We all tend to have trouble relating foreign currency to the American dollar, at least off the top of our heads while shopping. Foreign merchants take advantage of this fact at the checkout counter by offering to quote the final price in U.S. dollars and, unbeknownst to tourists, making that conversion at an uncompetitive exchange rate. Avoiding these unnecessary costs is quite simple, however. All you must do is refuse to sign any check or receipt not expressed in the local currency. If you're worried about deciphering the cost of meals and goods during your trip, just brush up on conversion rates before leaving or just get an App for your phone.

Tip 4: Always Carry Your Passport
With the institution of chip-and-pin technology, European credit cards have surpassed U.S. credit cards in terms of fraud security. Cards in the U.S. still use the less-sophisticated magnetic stripe system, which is no longer trusted abroad. As a result, many foreign merchants - particularly those in Europe - will not accept your credit card if you don't have proper identification. As long as you carry your passport, you should be fine, however. Merchants simply want to be able to verify that the person using a credit card is actually the one authorized to do so. (For more travel tips, check out Travel Tips For Keeping You And Your Money Safe.)

Bottom Line
While overseas travel can be both confusing and expensive, there are ways to minimize the cost and hassle of spending abroad. As long as you have a credit card with no foreign transaction fee, you notify your credit card company of your travel plans and you only pay for purchases expressed in terms of the local currency, you should be able to avoid post-trip credit statement surprises. In addition, thanks to a recent European Payment Council resolution that restricted the use of magnetic strip credit cards, you must remember to both have your passport on you whenever you go and to bring a debit card that can be used overseas at no extra charge.

In the end, a trip overseas shouldn't be characterized by worries over conversion rates and handling foreign money. So get the right spending vehicles before leaving and allow your focus to shift to its rightful place: having a good time or getting down to business. (For more tips on saving money when traveling, check out Globetrotting On A Budget.)

Related Articles
  1. Credit & Loans

    Can Corporate Credit Cards Affect Your Credit?

    Corporate cards have a hidden downside. If the company fails to pay its bills, you could be liable for the amount and end up with a damaged credit rating.
  2. Credit & Loans

    Millennials Guide: Picking the Best Rewards Cards

    There are perks a-plenty on offer, but you have to find the right plastic for your lifestyle.
  3. Investing News

    What Is The New Credit Card Chip Good For?

    Under current U.S. credit card requirements, credit card issuers are required to issue chip cards as of October 1, 2015. Instead of swiping your card as you do now, you will slide the card into ...
  4. Savings

    Best Places to Exchange Currency in Boston

    Since the nation’s first colonial currency was established in Revolutionary War-era Boston, the city’s currency exchange situation has come a long way.
  5. Credit & Loans

    5 Ways to Maximize Your Credit Card Points

    How to get the most bang for your rewards buck.
  6. Investing

    How to Effectively Compare Credit Card Rewards

    There are so many different reward credit cards that are available. Understanding how each type work will help you pick the best card for your needs.
  7. Credit & Loans

    Joint Credit Cards: The Pros and Cons

    A joint credit card may sound like an easy way to split the bills, but make sure you know what you’re getting into first.
  8. Personal Finance

    Finding Cheap Airline Tickets: An Insider’s Guide

    If understanding airline pricing feels like decoding riddles, arm yourself with these six simple strategies to land the best value ticket available online.
  9. Credit & Loans

    Travel Tips: Avoid Exchange Rate Headaches

    How to avoid the most common issues and hassles raised by exchange rates while traveling abroad.
  10. Investing

    Why U.S. Credit Cards Are Getting a Chip and Pin

    With the introduction of EMV technology into U.S. credit cards, consumers should worry less about fraud and counterfeiting.
RELATED TERMS
  1. Transferable Points Programs

    With transferable points programs, customers earn points by using ...
  2. Luhn Algorithm

    An algorithm used to validate a credit card number.
  3. Roll Rate

    The percentage of credit card users who become increasingly delinquent ...
  4. Truncation

    The requirement mandated by the FTC for merchants to shorten ...
  5. Purchase Money Security Interest ...

    A security interest or claim on property that enables a lender ...
  6. Linked Transfer Account

    Accounts held by an individual at a financial institution that ...
RELATED FAQS
  1. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  2. What is the best way to start to rebuild your credit after a bankruptcy?

    Bankruptcies can be devastating to your credit score. Even worse, a bankruptcy will be listed on your credit report for between ... Read Full Answer >>
  3. What were the primary financial crimes involved in the ZZZZ Best case?

    ZZZZ Best was a company started by Barry Jay Minkow that claimed to be a carpet cleaning business. In fact, it was a Ponzi ... Read Full Answer >>
  4. Can a creditor sue me for a delinquent account?

    If a credit card account becomes delinquent, the creditor can sue the debtor for the balance as soon as the delinquency occurs. ... Read Full Answer >>
  5. How do I transfer my credit card history from one country to another?

    It is currently not possible to transfer your credit history to another country if you relocate. The credit metrics used ... Read Full Answer >>
  6. What are some examples of simple interest loans?

    Two good examples of simple interest loans are simple interest car loans and the interest owed on lines of credit such as ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!