Q&A: What credit questions should you ask before heading overseas?
Question: I’m going to Europe with my family in a few months. What type of credit questions should I ask my bank? For instance, I’m wondering if I should take a credit card or a debit card.
Answer: Before you travel overseas, you need to take some steps to make sure your trip goes as smoothly as possible. Make the right choices and your travels will not only be a breeze, but you’ll save money, too.
Notify your banks that you’ll be traveling
If you don’t take this step, you risk having your credit card and debit card accounts frozen while you’re overseas. This can happen because your credit card issuer knows your spending patterns. If you live in Los Angeles, but purchases in Paris suddenly start showing up in your account, then the bank might think your card has been stolen. Unless, of course, you’ve been known to regularly shop in Paris.
If the bank suspects fraud, it will freeze your account for your safety as well as for their own. This can be terribly embarrassing (and maybe even worse if you don’t have any plastic backup with you) when you try to pay your bill in a lovely French cafe and your card is rejected.
Take at least one credit card, preferably a Visa or MasterCard
First, you need to know that Visa and MasterCard don’t issue credit cards. They are payment processing networks. Discover and American Express are both credit card issuers and payment processing networks.
Visa is the most widely accepted credit card in the world, followed by MasterCard. If you have a Discover or an American Express card, it’s fine to take one of these cards on your trip, too. But do make sure you also have at least a Visa or MasterCard in your wallet just in case one of your other cards gets rejected.
And if you have a credit card with a chip, that will come in handy overseas. In most places, they can still process a transaction if you use a mag-stripe credit card. But you might also encounter situations where your mag-stripe card won’t be accepted.
Take a credit card that waives foreign transaction fees
Foreign transaction fees are charged by most credit cards issuers, although there’s an increasing number of credit cards that waive this fee. These fees are a percentage of the amount of purchases you’ve made in foreign currency. Foreign transaction fees are charged by the payment processors, like Visa. But the credit card issuer (the bank or financial institution) can choose to waive the fee.
Sometimes, the bank doesn’t waive the fee and even adds their own fee to that of the payment processor. So you’ll have, for example, a 1 percent Visa fee and a 2 percent card issuer fee, which would be, in total, a 3 percent foreign transaction fee. So if you have a credit card that charges this fee, expect it to be between 2 percent and 4 percent of your purchase.
Now, you can save money by using a credit card that waives these fees. Capital One and Discover waive foreign transaction fees on all of their credit cards. Other credit card issuers waive these fees on some of their cards, but not all. So you’ll need to review the rates and fees for each credit card to determine if the foreign transaction fees are waived. And if you can’t get your credit questions answered by reading the disclosure statements, don’t hesitate to call your bank for clarification.
Take a debit card with you
Consider your debit card a backup and not your main source of funding. If you have a financial emergency, such as having your credit card account frozen, you’ll be relieved you have a debit card on hand while you straighten out your credit card account.
But with a debit card, you have to watch out for fees. In most cases, you’ll pay a fee because you’re using an ATM out of your network, which is around $2 to $5. Be aware that you also might be charged a foreign transaction fee, which averages around 3 percent. There could also be a charge by the foreign owner of the ATM you used.
All of these fees could add up to a lot of dough. So, consider putting a little cash in your pockets before you leave town. That way you’ll have an emergency stash of cash and you won’t have to pay the exorbitant fees that happen when you use a foreign ATM.
And if you’re thinking you don’t need to take a debit card because you can get a cash advance on a credit card, think again. You’ll pay a 3 percent to 5 percent transaction fee as well as a high interest rate. The really awful part of this approach? The interest starts ticking right away.
Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author’s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This content was accurate at the time of this post, but card terms and conditions may change at any time. This site may be compensated through the credit card issuer Affiliate Program.