When traveling abroad, cash is king. Almost every merchant on the planet accepts local currencies for standard transactions.
However, it's a mistake to finance your entire trip with paper money:
- Cash is easily lost or stolen — and can't be replaced.
- Carrying large amounts of money makes you an easy target for thieves.
- Value is lost every time you convert from one currency to another.
- You also lose money every time you withdraw cash from an ATM.
This is why experienced travelers take their credit cards with them. Doing so helps them avoid many of the above drawbacks. Plus, traveling with plastic offers numerous benefits as you’ll see below.
However, relying exclusively on credit cards also has certain disadvantages as well.
Let's look at some of the pros and cons of using a credit card when abroad.
The Downside of Credit Cards When Traveling
Probably the most important hurdle is that many international merchants operate cash-only businesses. Street vendors, concession stands and taxis all fall into this category. Right away, your Visa and MasterCard are useless for these types of transactions.
Here are some additional strikes against plastic:
- Many merchants do accept credit cards, but they only take EMV chip cards If you have magstripe plastic in your wallet, you might not be able to buy anything at all.
- Some merchants may only accept EMVs — that are issued by local banks.
- Some credit cards carry international finance charges that range anywhere from 2 to 5 percent. However, you can avoid these fees by shopping around for better offers.
- Some credit card transactions require ID verification. This means you’ll need to carry your passport with you at all times, but this is a good idea anyway.
Now let’s look at some of the major benefits of card-based transactions when traveling.
The Upside of Using Credit Cards Abroad
All of the following assumes that you have a chip-enabled EMV credit card. As already mentioned, older cards don't work abroad in most cases.
Here are the primary benefits of using your credit card as much as possible:
- Plastic is more convenient. You don't have to carry as much money or change currencies as often. This is ideal for larger purchases like flights and hotels.
- Unlike cash, credit cards provide fraud protection. For starters, most international merchants require EMVs, which are automatically more secure than their magstripe counterparts. Though many card-issuing banks also provide liability coverage and the ability to cancel your card if it's stolen.
- Depending on your bank, it's possible to earn rewards. These are points that you can apply to your next big trip.
- Credit cards typically provide better exchange rates than what you'll get from ATM machines and currency stands.
- Depending on your card issuer, your purchases might automatically qualify for insurance. This coverage doesn't simply apply to consumer goods — it also covers travel delays and lost luggage.
One Final Travel Tip Before You Go Abroad
Before you go, it's important to call your card issuing bank in advance and let it know about your travel plans. Otherwise, your credit card could get flagged for suspicious activity.
If you're lucky, your card-issuing bank might simply suspend the account, but in some cases, your credit card could be canceled completely. It's very difficult to ship a replacement when you're on the other side of the world.