On a recent trip to Madrid, I realized something that would have been unimaginable as a traveler five years ago: I didn’t need cash once. On the one hand, this meant no leftover euros as a “souvenir.” On the other, more important hand, this was confirmation of a shift in common consensus for travelers: Despite previous wisdom that you need to convert to local currency, these days, using a credit card is better than using cash during international travel.
Relying solely on a credit card abroad can be the right move on your next vacation, but it still depends on several factors, like the credit card you have and your travel habits. Here are some considerations to keep in mind.
Reasons to use your credit card abroad
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Security: Compared to carrying large amounts of cash, credit cards offer a higher level of security. If your credit card gets lost or stolen, you can report it and have it deactivated, protecting you from potential fraud. Many credit cards also offer fraud protection policies.
Exchange rates: Using a credit card can be advantageous if your card issuer offers favorable foreign exchange rates. Then again, some credit card companies add a foreign transaction fee (usually around 2-3%) for purchases made in foreign currencies, so it’s essential to consider these fees.
Rewards and benefits: Some credit cards offer travel rewards (cashback, points, or miles) for every purchase you make. If you have a credit card that offers rewards and doesn’t charge hefty foreign transaction fees, use it abroad to accumulate points or miles for future travel.
Emergency funds: A credit card is a necessity in case you run into unexpected expenses during your travels.
Purchase protection: Certain credit cards offer purchase protection, which can be valuable if you encounter issues with products or services you bought while abroad.
What to keep in mind before relying on your credit card
Card issuer: Before you board that plane, make sure that your card is widely accepted. Visa or Mastercard logos are accepted in many countries, making them convenient for making purchases, booking accommodations, and dining out without the need for local currency.
Foreign transaction fees: Like we mentioned above, many credit cards charge foreign transaction fees, which can add up quickly and make your purchases more expensive.
Dynamic currency conversion: When using your credit card abroad, some merchants may offer you the option to pay in your home currency instead of the local currency. This service often comes with unfavorable exchange rates and additional fees, so if you encounter this option, it’s best to decline and pay in the local currency.
Risk of overspending: Hey, we know credit cards can make it easy to overspend—especially when you’re on vacation and may not be as mindful of your expenses.
Card acceptance: Regardless of issuer, there may still be places, especially in rural areas, where cash is the preferred form of payment.
The bottom line
Using a credit card abroad can be the right move if you have a card with low foreign transaction fees, good exchange rates, and travel rewards. However, it’s important to use your credit card responsibly and be aware of potential fees and risks. We do recommend bringing a mix of payment methods—you’ll want cash for emergencies and places with limited card acceptance, and then use your credit card to rack up points for pretty much everything else.