Credit cards are one of the best payment methods to use when traveling abroad. Not only are credit cards more secure than cash, they generally offer very favorable exchange rates, as you can see in the chart below.
This is why it’s generally a good idea to make your purchases in the local currency and allow your credit card company to convert your purchase to U.S. dollars. This usually results in a much better exchange rate than allowing a local merchant to make the conversion at the point of sale.
Credit cards vs. traveler checks
Traveler checks used to be the best way to pay safely when traveling abroad, and they still exist today. Traveler checks are paper documents that you purchase in desired amounts before you leave, then cash in for local currency at your destination.
Traveler checks are much more secure than carrying large amounts of cash. They never expire, and they can be replaced by the issuing bank if lost or stolen. However, they can be more cumbersome than paying with a no-foreign-transaction fee credit card and using a debit card to pull cash from a local ATM as needed.
The advantages of using a debit and credit card vs. traveler checks include:
Ease of use, convenience and speed
The ability to earn rewards on your trip
No need to pay a lump sum before your trip
Exchange rates on credit cards can be good
Credit cards tend to be more secure than carrying large sums of cash
Most credit cards offer $0 fraud liability
The disadvantages of using a debit and credit card vs. traveler checks include:
Some cards charge foreign transaction fees
Many banks charge ATM fees for withdrawing cash abroad
You may have less control over the exchange rate
Keep in mind that traveler checks may also come with fees at the point of purchase and even if you need to re-deposit unused checks in the bank when you get home. But traveler checks can make sense in some scenarios:
- If you don’t have or don’t want a credit card
- You have a card that charges foreign transaction fees and you either don’t want a new card or don’t have time to get one before your trip
- If you’re going to a remote location with few ATMs where many merchants don’t accept credit cards
There are workarounds for the disadvantages of credit and debit cards:
- You can get a credit card with no international fees and get a debit card that will allow you to avoid hefty ATM fees (see below).
- If you have a no-foreign-fee credit card and don’t want a debit card, you could use your credit card for most purchases and get a small amount of traveler checks for the times you need cash abroad.
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