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

    Adjustable Rate Mortgage: What Happens When Interest Rates Go Up

    Adjustable rate mortgages can save borrowers money, but they can't go into it blind. In order to benefit from an ARM, you have to understand how it works.
  2. Credit & Loans

    Walmart MoneyCard Vs. Walmart Credit Card

    Discover how the Walmart MoneyCard and the Walmart credit card have different benefits that may influence your decision on which one to choose.
  3. Savings

    These 10 Habits Will Help You Reach Financial Freedom

    Learn 10 key habits for achieving financial freedom, including smart budgeting, staying abreast of new tax deductions and the importance of proper maintenance.
  4. Credit & Loans

    Have Bad Credit? 6 Ways to a Personal Loan Anyway

    It'll cost you more, but borrowing is definitely doable. Here's how to proceed.
  5. Savings

    Avoid the Worst Air/Rail Travel Fee Rip-Offs

    Airline fees can vary tremendously. We've compared them side-by-side – along with Amtrak's new charges – to determine who charges the most (and least).
  6. Credit & Loans

    Personal Loan Rates: 6 Ways to Find the Best Deals

    Terms can vary tremendously, so you better shop around, both in person and online.
  7. Credit & Loans

    Personal Loans: Compare the 6 Biggest Banks

    Need a personal loan? You may stop by one of these big banks for help. Their offerings vary in size, rates and loan types, which means you have options.
  8. Credit & Loans

    Unsecured Personal Loans: 8 Sneaky Traps

    If you are seeking a personal loan, be aware of these pitfalls before you proceed.
  9. Credit & Loans

    How To Minimize Holiday Debt Before It Happens

    Holiday expenses can drown you in debt. Find out how to avoid this festive spending hangover.
  10. Credit & Loans

    When Are Personal Loans a Good Idea?

    You never want to borrow money for frivolous reasons, but these five circumstances might warrant it.
  1. How many FHA loans can I have?

    Generally, the Federal Housing Administration (FHA) does not insure more than one mortgage per borrower. This is to prevent ... Read Full Answer >>
  2. Does the Walmart credit card have an annual fee?

    The Walmart credit card does not charge annual fees to its cardholders. It does, however, have other fees associated with ... Read Full Answer >>
  3. Does NetSpend work with PayPal?

    NetSpend works with PayPal; a PayPal account can be linked to a NetSpend account, and vice versa. Also, PayPal allows its ... Read Full Answer >>
  4. How does NetSpend overdraft protection work?

    NetSpend offers overdraft protection that allows the account holder to make transactions or incur fees with amounts that ... Read Full Answer >>
  5. Are FHA loans assumable?

    Loans insured by the Federal Housing Administration (FHA) on or after Dec. 15, 1989, are assumable by qualifying borrowers. ... Read Full Answer >>
  6. How do NetSpend cards work?

    NetSpend prepaid MasterCard and Visa cards are popular prepaid debit cards requiring no minimum balance and no credit check. ... Read Full Answer >>
Trading Center