Credit cards have become such a simple and integral part of shopping and life generally that it is now entirely possible to go for months and perhaps even years without touching a banknote. You can pay your bills, buy your groceries, dine at restaurants, shop for essentials and luxuries - virtually every transaction can be completed with a credit card. You can book an overseas holiday with a credit card…but what happens when you get there?
There are a number of potential obstacles. While many western countries and an increasing number of eastern ones allow a life of purchasing with plastic, less economically developed countries still heavily rely on cash.
And that’s not all. Many people use credit cards issued by their bank. It’s a logical choice as you can pay the debts directly from your current account from the same institution. But banks are generally reluctant to move money between countries and making purchases outside of the country the card was issued in can come with a hefty fee, assuming you can complete the transaction at all.
And it’s not just fees, either. There’s also the currency exchange to consider. Most credit cards - but especially those issued by banks - will be locked to one specific currency, so if you make a purchase in a country that doesn’t use the same currency, your bank will have to exchange the credit into the right currency. This will generally be at a rate that is a lot more favourable for the bank than it is for you, which gives you less buying power for your credit.
However, this does not mean that reverting to travelling with huge bundles of foreign currency (which is very risky and insecure) or traveler's cheques (which are not very widely accepted, these days) is necessary. You can still keep the convenience and security of purchasing with plastic while you’re on your travels. Assuming you’re travelling to a place that has the infrastructure and economic development to handle credit card transactions, there are a few ways you can minimise the risks and negative impacts.
1. Use a credit card that’s widely accepted
This probably seems like an obvious one, and applies as much for selecting a credit card to use in your own country as it does for choosing one to use overseas, but picking a card that will be widely accepted is essential. Visa cards are accepted in over 200 countries around the world, which is pretty impressive when you consider that some sources suggest there are only 193 countries in the world! The United Nations officially recognises 241 countries and territories, which means that there are only about 40 that don’t accept Visa.
Keen to one-up their closest competition, MasterCard claims to be accepted in over 210 countries. Suffice it to say that the only countries where one of these two cards won’t be accepted are probably countries which aren’t the most popular for tourists.
By contrast, American Express is accepted in fewer countries globally, despite being the most popular card in 23 countries. In fact, it’s even less widely accepted in America than Visa and MasterCard, with about 6 million US merchants accepting it compared to 9 million each for Visa and MasterCard. Diners Club International does a little better, being accepted in about 190 countries.
2. Get a card with low foreign transaction fees
Regardless of how many countries your type of credit card is accepted in, it’s the issuer that decides how expensive doing so is going to be for you. Since sending money across national borders is a remarkably difficult and slow process, card companies tend to prefer that you only use their products in the country they were issued in.
Most credit card companies add about 3% to each overseas transaction as their fee. If you assume that a mid-range holiday in Thailand costs an average of 1,000 to 4,000 baht per day, an additional 3% makes it 1,030 to 4,120 baht per day or as much as 1,680 baht on top of the cost of a two-week break. You’re basically paying for a low-budget 15th day on a 14-day holiday without getting any of the benefits of it.
Fortunately, there are some cards which don’t do this. Capital One and Discover, in particular, do not charge this fee on their cards, making them a very good choice if you travel a lot. It’s a feature of the deal that’s worth looking out for when it comes to deciding which credit card you want to add to your wallet. It’s also worth noting that some cards specifically designed for travelers offer other benefits, including protection for flight delays, trip cancellation, lost luggage and more.
3. Tell your issuer where you're going
For your peace of mind and security, credit card companies monitor where your transactions are taking place and what you are purchasing. If you suddenly buy something completely out of your usual habits in a country on the other side of the planet, the natural assumption is that your card has been cloned or stolen. Usually, the company will automatically block all further transactions until the truth is confirmed.
While this process is extremely useful 99% of the time, what happens when the overseas and unusual transactions are actually you using your card while on holiday? As so many people use credit cards as their sole medium of payment, your whole world could come to a crashing halt if the card suddenly stops working. That's not such a problem in your home country as you can quickly call the credit card company or ask a friend to pay for you or possibly even get some cash out of your savings or current account and pay the old fashioned way. All of these options are a lot harder - and maybe even impossible - if you're overseas.
The solution is incredibly simple and yet often overlooked - just tell the card company that you're going overseas for a bit. They will usually deactivate the auto-lock system for the duration of your trip, ensuring that you don't find yourself fund-less in a foreign land. Of course, this does come with the slight risk that any credit card fraud that occurs during your holiday won't be immediately detected, but travel insurance will often cover any loss incurred. So long as you are careful, this is a relatively minor risk when compared to the very good chance of your card being frozen because of your own usage of it.
4. Be careful who you buy from
In any and all countries in the world, tourists are considered easy targets by thieves, pickpockets, fraudsters, scammers and any number of other unscrupulous chancers. They don't know the area, generally have an inherent trust of friendly locals and the simple fact that they're enjoying their leisure time in a foreign country clearly indicates that they have enough money to make them worth stealing from.
Minimising the risk of falling victim to these individuals starts with basic theft-prevention: keep your wallet in a front pocket - ideally one with some kind of fastener to keep it closed; don't carry any more money than you have to and keep the rest locked in your hotel safe; don't believe or buy into any offer that seems too good to be true; be suspicious of random strangers starting an idle conversation with you in the street, particularly around major tourist attractions - the list goes on.
However, the risk extends beyond shady characters looking to lift your wallet or swipe your purse. The person who takes the most money from you might be wearing an official uniform and working for a large enterprise. For example, there are plenty of reports of people being charged double for fuel at petrol stations near airports. You refill the tank of your hire car so you can return it as you received it, the attendant swipes your card, claims there was an error, swipes again and you've just paid for the same fuel twice. You're in too much of a rush to get to your flight in time to notice until you get your next credit card bill.
Similarly, you might be paying for some souvenirs in a big, fancy mall and the attendant walks off with your card to process the payment. When they come back, they return the original to you before creating a clone with the data they took off it while it was out of your sight. Again, this is far from unheard of.
The even simpler scam is for the attendant to just add an extra zero on the amount they're taking from your account for the purchase, multiplying the cost by 10. If you don't notice it immediately, you probably won't spot it until you get back to your home country, at which point you're less likely to be able to get it back. Sometimes this can happen by accident, though that doesn't make it any cheaper for you. Either way, it's best to double-check the amount you're being charged before you sign the receipt or enter your PIN.
As a general rule, you should treat your credit cards with the same reverence and paranoia you treat your passport. Avoid letting them leave your sight unless necessary and double-check every single detail of any part of the process of using them. While this advice applies just as much in your home country as it does when travelling, the risk is a lot greater when you are a tourist, so your vigilance needs to be greater, too. It's also advisable to research the common scams reported in your destination before travelling so that you know what to be vigilant for.
5. Don’t stick to your own currency
This section is more for people travelling to Thailand but the same logic applies to those with Thai bank accounts who are travelling abroad.
If you’re buying a fancy meal and I tell you that the cost is 6,000 baht, do you consider that a good deal or not? Without checking the conversion rate or without having lived in Thailand for a bit, you are very unlikely to be able to know precisely how much that is and whether or not it is a fair price for the value of the meal. If I tell you that it’s about US$200 that might help, unless you don’t know the value of the dollar relative to your home currency either.
Given that checking the exchange rate, whipping out a calculator or doing the sums in your head with every purchase is incredibly frustrating, many travellers choose to take advantage of dynamic currency conversion (DCC) or cardholder preferred currency (CPC). With these processes, you designate the currency that you will pay in. The benefit is that you can more easily understand the amount you are paying since it will be in a currency that you are more familiar with.
If you’ve traveled with cash before, you’ll know that currency conversion can be an expensive business. While some companies charge a commission for the service, others boast a 0% commission, but then exchange the currency at significantly below the actual exchange rate, which can sometimes add up to more money for them than the commission would have cost. Credit card companies are no different and the option to pay in your home currency could come with an exchange rate that is as much as 18% off what it is supposed to be.
If you thought paying a 3% fee per transaction was bad, how about that two weeks in Thailand costing about 10,080 baht extra because every transaction is conducted in your home currency instead of Thai baht? That’s an additional four flash days on your holiday that you’re paying for without getting. Suffice it to say, the added complication of running the calculation each time is a small price to pay.
6. Use a multi-currency card
DCC and CPC have created a lot of controversy over the years because they are so profoundly unkind to users, merchants and even card issuers. Fortunately, some alternatives have now emerged which combine the convenience of knowing the value of the money you are spending with the reduced cost of making payments in the currency of the country you are shopping in. The chief alternative is the multi-currency travel wallet.
Extensively used for cryptocurrencies, these wallets can also store Thai baht, US dollars, British pounds, Euros and a number of other major currencies. A number of independent financial institutions like YouTrip and TransferWise offer this service, but so do a couple of the larger international banks like Citibank.
The service is generally activated through an app, which forms the link between your bank account and your card. You can choose an amount of money to transfer into another currency and load that credit onto your card. Making the currency exchange before the purchase instead of after keeps the costs to a minimum and, unlike some of the ‘traveler's credit cards’, there’s no annual fee just for having it.
You can now use just as you ordinarily would, though with the exception that you can only spend the money you have already converted. That’s where the ‘wallet’ part comes in - it’s effectively the same as having a finite supply of hard cash, but with the convenience and safety of having it on a card.