Using Your Credit Card Abroad

For most people taking a credit cad abroad when heading off on holiday or on business is nothing unusual.

Most people like to have the peace of mind that they have a credit card available for emergencies even if they don't plan to use it and have alternative means of payment such as traveller's cheques, which is fine. However, there are also those that take their credit cards abroad with a view to using the card to make all of their purchases and for all spending, and this can prove very costly.

It is advisable to take a credit card with you when you head off abroad, as you don’t want to get stranded without any means of making a purchase or getting money should the need arise. However, it is also wise to remember that credit card companies make a great deal of money from consumers that use their credit cards abroad, and you should familiarize yourself with some of the ways in which this is done.

The first thing that you need to remember is that credit card companies charge what is known as a foreign transaction fee, and this is a fee that is charges on any transaction that is made on the credit card whilst abroad. The foreign transaction fee can vary from one credit card provider to another, but if you are using the credit card regularly even the lowest fees can quickly add up making the cost of purchases far more expensive. You should make sure that you know what sort of foreign transaction fee your card issuer charges, so that you are prepared when your statement arrives otherwise you could be in for a shock.

These foreign transaction fees are charged on each transaction that is carried out on your credit card whilst you are abroad, and there is usually a minimum fee charged, which is around 2% on average, although a number of card providers have increased this fee over recent weeks. Anything above the minimum transaction fee is charged as a percentage, which is on average around 2.75%, although this can again vary based on the card issuer. With these fees being charged each time you make a transaction using your credit card abroad can indeed prove extremely costly.

You will find a number of ATM machines from which to withdraw cash on your credit card whilst you are abroad. However, this is not recommended as you will then also be charged cash transaction fees, which make it even more expensive to use your card abroad. Making just one withdrawal a day on your card could cost you a small fortune. For those determined to use their credit cards to make purchases and withdrawals whilst abroad it is advisable to check the fees applied by the card issuer in order to find the one that offers the lowest fees and charges.

Another thing to look out for when using your credit card abroad is Dynamic Currency Conversion. This is where you make a payment at a shop, restaurant, hotel, or other establishment using your credit card and the money is converted to your home currency rather than being taken in local currency.

Although you may think that this is convenient and enables you to see what you have spent, many retailers add on a hefty fee – sometime up to 4% - by way of a conversion charge, and this can really increase costs. Many people fail to realize that they have fallen victim to what many call a legal scam. It is important that you check this on your receipt, and wherever necessary ask that the transaction be voided and the money taken in local currency rather than your home currency.

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