Let me share a credit card horror story. Before my sister Caitlan went abroad for the first time last summer, she asked her “credit card expert” of a brother which card she should bring with her to Europe. She followed my advice to a T and signed up for a card. The problem was, that was the only payment method she brought with her.
A few days into her trip, she called me, frustrated, because she had discovered that many merchants in Europe accept only cash. She was having a hard time finding places where she could get cash on her credit card.
I asked why she wasn’t pulling cash from her debit card. To my dismay, she replied that she hadn’t brought one. She thought just one travel credit card would cover her needs. My parents were able to FedEx a debit card to her, but in the meantime she racked up a lot of cash-advance fees and related interest.
Credit cards are a great way to pay when abroad. They’re far safer to carry than wads of cash, they can help you avoid foreign transaction fees, they’re simple to use, and you can get rewards for your spending. All that said, they do come with their own risks, as my sister discovered.
But there are ways to mitigate those risks, or even avoid them entirely.
4 things to be aware of when using credit and debit cards abroad
1. Acceptance: Cards may not be as widely accepted as you’re used to here in the States, so you’ll need access to cash. Acceptance also varies by brand. Visa and MasterCard have the broadest acceptance. Between American Express and Discover, American Express tends to work well in Europe, and Discover works well in Asia because it’s accepted anywhere that accepts China UnionPay, the predominant payment network in China.
2. Foreign transaction fees: Most debit and credit cards charge a fee every time you buy something abroad. These fees are usually around 3% of the purchase price. As you can imagine, they add up quickly. But some debit cards and credit cards don’t charge these fees.
3. Cash advance fees and interest: The card my sister took abroad didn’t charge foreign transaction fees, but apparently I failed to tell her about the cost of cash advances. Credit cards can be used at ATMs to withdraw cash, sure, but it’s rarely a good idea. Each withdrawal results in an upfront fee. On top of that, the money borrowed begins accruing interest immediately — unlike normal credit card purchases, where you can avoid interest entirely if you pay your balance in full. To avoid this, make sure to bring a debit card for all of your cash needs.
4. Dynamic currency conversion: When you’re outside the U.S., some stores will offer you the option of seeing the price of a purchase in U.S. dollars, as opposed to the local currency. This sounds really nice, but it’s a bad deal. Baked into the dollar price will be a fee and an unfavorable exchange rate. Save yourself money; do the math on your own.
Payment cards you should bring
As far as payments go, I recommend you bring three cards with you when you travel abroad: a travel credit card with no foreign transaction fees, an extra credit card (or two) for backup and a debit card. For extra security, keep your backup credit card separate from your primary card, so you still have access to money in case your wallet is stolen.
My sister ended up paying hundreds of dollars in cash advance fees and interest that were completely avoidable. So when you pick your perfect travel credit card to accompany you on your dream vacation, don’t forget to pack a debit card, too.
Sean McQuay is a credit and banking expert at NerdWallet. A former strategist with Visa, McQuay now helps consumers use their credit cards and banking products more effectively. If you have a question, shoot him an email at firstname.lastname@example.org. The answer might show up in a future column.