Making purchases abroad is almost seamless given the size and scale of the global payment networks. Review a few items before you depart and you should be all set!
• Travel notification
We recommend that you notify your credit card company about your planned foreign travel in an effort to prevent having your account erroneously flagged for fraudulent activity.
Also inquire with your card issuer to:
- Make sure you understand how foreign transaction fees are assessed (we only travel with cards that don’t assess these foreign transaction fees)
- Confirm if your card is equipped for “Chip & PIN” transactions.
See below for additional information on both.
• Foreign transaction fees
As noted above there are plenty of credit cards that don’t charge any extra fees for credit cards transactions made overseas in a foreign currency so you shouldn’t have to pay these fees. However, many credit cards do impose fees so make sure you are at least aware of the potential costs before you depart!
• Make sure credit card purchases are transacted in the local currency
This is usually a non-issue as most merchants process your purchase in the local currency, just like they would for anyone else. And this is exactly what you want as you typically get the best foreign exchange rates from the major credit card networks like Visa, MasterCard, and American Express (think about their enormous daily volume of foreign exchange transactions).
However some merchants may convert the transaction to U.S. dollars as a “convenience” but by accepting this you’ll typically get horrible exchange rates and/or fees. For example, if you are in England make sure the transaction you are approving is in British Pounds, not U.S. dollars. If you see dollars on the credit card terminal ask them to cancel the transaction and to start the process over again in the local currency.
• Chip & PIN credit cards versus signature credit cards
Even if your U.S. credit card has a chip it may not be configured to transact using a PIN rather than with a signature so you should call your credit card issuer to inquire about foreign transactions.
Most foreign countries use “chip & PIN” cards, meaning that instead of swiping and signing to make a purchase, transactions are initiated and approved by inserting the credit card and typing your PIN in the keypad. Many U.S. credit cards equipped with the chip are not equipped with a purchase PIN so will require a signature. The only time we’ve run in to trouble is when we’ve tried to purchase tickets at automated kiosks so give yourself enough time to queue at a ticket window if needed.
If you card is fully “chip & PIN” ready then just be sure you know your purchase PIN before you depart!
We try to limit our use of cash, not just when we are abroad, but also at home in the U.S. Having said that we always carry small denomination bills of the local currency. Hong Kong was an exception where almost all transactions except our hotel were settled in cash! Foreign credit cards were not readily accepted because almost all merchants accepted the local “Octopus” pre-paid debit type cards (that required cash to purchase and load).
The best foreign exchange rates are usually available when you use an Automated Teller Machine (ATM) when you’ve arrived at your destination. However, note that, unlike many “no foreign transaction fee” credit cards, just about every U.S. bank and credit union imposes a foreign transaction fee of at least 1% on top of ATM access fees. The one exception we’ve found is through the Schwab bank program so if you have a Schwab debit card then you can avoid the fees, otherwise compare your options before you depart.
Despite the potential for fees we typically wait until we’ve landed at our destination before withdrawing enough cash to get us to our lodging and last for a couple of days.
Some travelers inquire about exchanging dollars for foreign currency with their local bank but the exchange rates will probably not be great and your bank may require advance notice.
One final note. The one place to definitely AVOID AT ALL COSTS is any one of the small, single person foreign exchange kiosks you often see in airports as the exchange rates are the worst you will find!