6 Reasons Why You Should Use a Credit Card while Traveling Abroad

While traveling abroad, there are a number of options to use in order to buy things. You could use cash (foreign currency), a debit card, or a credit card. Each has its own benefits. However, by and large, most of your purchases should be made using a credit card. Credit cards have a number of security and other benefits that make them the best options to use while abroad.

 

Safety

Safety is perhaps one of the top reasons to use a credit card while traveling. If you somehow happen to lose cash (or worse, be mugged), that money is gone. There is not much of a chance that you will be able to get it back. A debit card can be compromised quite easily as well. Thieves have a variety of ways that they are able to utilize your debit card for their own use. The problem here is that if they drain your account, your money is gone. Even though the bank may refund you after you submit a claim, it could take multiple weeks for the money to be restored. In the meantime, you could end up with an overdrawn account and possibly unpaid bills.

On the other hand, if your credit card is compromised, your card can be instantly shut down to prevent further transactions. While your claim is being investigated, you are not out actual money. The credit card company is the one who is out money. You still have whatever your secondary source of funds is to cover you. You won’t have to deal with bills not being paid and not having a way to pay for things.

 

Rewards

There are a wide variety of rewards available on credit cards. You can get cash back, points, or airline miles. You can trade these in and get something essentially for free. Credit card rewards are literally free things/money.

When you look for a rewards card, look for one that offers a reward you will actually use. Then, check that the percents to get the rewards are worth it and are in categories that you will use. So, if you eat out a lot, look for a card that gives you at least 2% rewards on restaurants. It might take a little bit of research, but having a rewards card is totally worth it.

 

Insurance

Most credit cards come with insurance on purchases that you make. For instance, if you rent a car, you’ll most likely have a layer of insurance if something were to happen while driving that car. Insurance is probably offered for travel (ex. if you have to rebook a flight) or products (that new cell phone you want).

 

Avoid Excessive Holds

Whenever you book a hotel or a rental car, the company will put a hold on whatever card you give them. This is meant to protect them from incidentals in case you somehow damage it or add extra charges (room service, anyone?). The problem is, these holds could be several hundred dollars more than the actual cost of the booking and it can take a while for the hold to fall off. In the meantime, that money is tied up.

If you use a debit card, they are tying up money that you could potentially need. However, if you use a credit card, the hold only ties up more of your limit. Chances are, your credit limit is decently more than what you would actually need (it should be at least).

 

Build Credit

One of the best things about credit cards are that they help you build credit. If you consistently pay your card on time, this is reported to the credit bureaus. Over time, it shows that you are creditworthy and will pay your bills on time.

As a result of building good credit, you’ll have any easier time in the future. You’ll have access to better rates and higher credit limits. If you ever need to borrow money, you’ll save a lot more money.

 

Avoid Foreign Transaction Fees

If you use a debit card, either at a point of sale place or at an atm, you’ll probably be hit with foreign transaction fees. These fees could be 1-5% and will slowly eat away at your cash. However, if you use a credit card that doesn’t have a foreign transaction fee, you’ll be able to save that money. Be sure to read your card’s disclosures and specifically look for a card that does not have this fee. It is common on travel rewards cards, but may not be found on others.

 

As you can see, using a credit card while traveling abroad is a smart move. It can provide you with security, benefits, and be a long term good idea. Be sure to do your research and find the best card for you.