A or B, the answer is always local…
Credit cards have come a long, long way. The addictive pieces of plastic are easily the most lucrative way to earn points and miles and thanks to the complete disappearance of most foreign transaction fees and a variety of helpful consumer protections, they really should be the go to for all purchases abroad.
With all these positives, merchants have figured out a way to skim a little bit of extra money off of unwitting transactions, and to avoid falling prey, you need to stick to a simple script…
First, Why You Should Use A Credit Card Abroad
Carrying lots of cash is always a risk when traveling. Using a debit card offers no consumer protections or rebates.
Many credit cards however, offer protections and benefits in cases of faulty gear, stores going bust and all that stuff. That’s good. If your card doesn’t have foreign transaction fees, and you have the cash to pay the bill in full, you should always use a credit card abroad.
You earn points on all purchases, and points add up to travel, or future savings. It’s like a rebate on everything. If your card does charge foreign transaction fees, there are clever options like Curve, and others which can eliminate them.
The Sneaky Trick Merchants Pull
Sometimes they don’t even ask. Merchants love to pull a trick where they ask if you wish to pay in your currency back home, let’s say you live in the USA, it would be dollars – or if you want to pay in the local currency.
If you’re visiting London, they’d ask if you want to pay in dollars or pounds. The answer, wherever you are, no matter what, is you always to pay in the local currency. If you’re in the UK choose Pounds, Paris – Euros, Thailand – Baht. You get the gist.
A business practice known as dynamic currency conversion (DCC) means that you get a much better exchange rate and therefore pay less by paying in the local currency rather than whatever your currency is called at home.
Choose the other (wrong) option, and you’re unwittingly paying more. The larger the transaction, the more meaningful the savings can be, up to $100’s! If you’re away from home, always choose the currency of the place you’re away, traveling in for credit card transactions – as long as your card doesn’t charge foreign transaction fees.
The More You Know
With decent currency conversion rats just a Google search away, by searching for something like 50 GBP to USD, it’s always interesting to compare the grand totals you would’ve paid.
When checking out at a hotel, or somewhere where significant money is being spent, the difference charged can be absolutely staggering. Assuming your credit card doesn’t charge these foreign transaction fees, again, always pay in local currency.
The next step: figuring out which credit card maximizes your return via nice category bonuses, like 3x points for dining or 5x for hotels…