Avoid currency conversion and overseas ATM fees or receive complimentary travel insurance with a credit card on your next holiday.
There are many ways for Americans to take their cash on holiday, including credit cards designed for overseas use. These credit cards generally charge low or no foreign transaction fees, no currency conversion fees and no ATM withdrawal fees while offering travel-centric perks such as complimentary travel insurance, rewards programs and airline lounge passes. Unfortunately, these cards aren’t entirely cost-free though. As the best credit card for you to use overseas will depend largely on where you’re traveling, how you plan on spending and your financial situation, you can use this guide to compare your options and find the right card for you.
How to compare credit cards for overseas travel
Credit cards provide you with access to credit overseas to make purchases. This type of credit card can provide additional benefits including zero fees on overseas purchases, $0 ATM withdrawal fees and complimentary travel insurance. To help make your comparison easier, we’ve outlined some of the fees and features you can factor into your comparison to find the right card for you.
Features of travel credit cards
In your hunt for a credit card to use overseas, one of the first features to consider is international acceptance. Credit cards with affiliation to Visa or Mastercard find acceptance in most countries around the world, at ATMs and EFTPOS terminals alike. Acceptance of Diners Club and American Express cards is not as widespread, and their use could attract higher fees.
Credit card fees
The fees you have to pay when you use your credit card overseas can have a significant effect on how much you end up repaying on your credit card account, so make sure you pay due attention to this. Here are some of the fees you can expect when using your credit card outside America:
- Foreign transaction fees. When you make an international purchase using your card, the money goes through currency changes. Your credit card converts US dollars to the required currency. When this happens, you’re usually charged a fee between 2% and 3%. If you want to avoid this fee each time you make a transaction overseas, consider a credit card that doesn’t charge a foreign currency conversion fee.
- Annual fees. If you have a card that’s designed for overseas use and it comes with extra features, it’s likely that it could also come with a higher annual fee. Before you apply, make sure the value you get from the card’s features outweigh the cost. Some cards also come with no annual fees for a promotional period or for the life of the card, so you should also factor this into your comparison.
- ATM withdrawal fees. If you use your credit card to withdraw funds overseas, you might be charged a few different fees. Firstly, most credit cards charge a cash advance fee when you use your card for ATM withdrawals (whether you’re in the US or overseas). As well as the cash advance fee, you’ll immediately attract the high cash advance interest rate. Secondly, many banks charge an overseas ATM withdrawal fee when using your card for this withdrawals outside of the United States. Thirdly, the local ATM provider might also charge a withdrawal fee. If you want to avoid this last fee, consider using a credit card that belongs to an ATM alliance.
If you’re travelling overseas, you’re going to have to organise international travel insurance. Using a credit card that offers complimentary insurance can help you save the time and money you’d otherwise spend on standalone cover. Depending on the card, the international travel insurance usually includes overseas medical insurance, transit accident insurance and travel delay insurance to name a few. The cover might also extend to your spouse or any dependent children travelling with you. As well as travel insurance, some credit cards offer purchase security insurance and extended warranty so you can shop with peace of mind. Complimentary insurance is often a feature of platinum credit cards, so make sure the feature is worth the cost of the card before applying.
Frequent Flyer benefits
Using frequent flyer credit card is an easy way to pick up rewards points as you spend overseas. Depending on the card, you might be able to redeem these points for flights with a specific airline, accommodation with partner hotels, travel vouchers, cash back on your account or products from a rewards store. If your card is designed for overseas use, you might find that you can even earn more points on foreign purchases. Compare frequent flyer credit cards with no foreign transaction fees to earn points without paying an extra cost overseas.
0% foreign transaction fee credit cards
What should I be aware of when using a credit card overseas?
- Adding funds to your credit card. There are certain people who add funds to their credit cards accounts before they leave for overseas, and they then make use of these funds through their card in the form of a debit card. By doing this, you can avoid paying interest. What you should know is that card providers don’t take any responsibility for funds you add to your credit card account, so if you end up losing your card, and if someone accesses the money in your account, you might lose out on valuable funds.
- Consider other options. Using your credit card is not the only way you can spend money overseas. You can turn to traveller’s cheques and travel money cards, and you can even look forward to using a Mastercard or Visa debit card.
- Excessive debt. When overseas, you might be tempted to buy one or more things that you can’t really afford, and since a credit card gives you instant access to money, you could let temptation get the better of you. Remember at all times that you’d have to repay all the money you spend using your credit card, and avoid getting into a situation that is difficult to handle.
What are the pros and cons of using a credit card overseas?
- Global acceptance. If you’re using a Mastercard or Visa credit card, you’ll be able to use your credit card in millions of locations around the world. American Express and Diners Club cards are also accepted worldwide, though in fewer places than Visa or Mastercard.
- Travel perks. Credit cards designed for overseas use often come with travel-related benefits such as frequent flyer rewards programs, complimentary insurance and airline lounge passes.
- Security of credit. When you’re travelling overseas, it’s wise to have more than one way to access your cash. Even if you have a prepaid card or debit card organised for everyday spending, a credit card can be used as a back up and the security of credit could come in handy in an emergency situation.
- Fees. Depending on the card, using your credit card overseas can come with many costs. Make sure you understand exactly what you’ll pay when using your card for foreign transactions before you apply.
- Limitations. Some cards come with limitations, including eligibility requirements, restrictions on how and where you can use the card plus, if it comes with a rewards program, constraints on your point earning opportunities.
- Temptation to spend. While a line of credit can provide you with peace of mind, it might also tempt you to spend money that you don’t really have. Remember that you’ll have to pay back everything you charge (plus interest in many cases).