Using credit cards overseas. You almost certainly will, but how you use credit cards overseas is not a decision to be taken lightly.

Traveling can be very counterintuitive. Habits and behaviors that work perfectly well in everyday life don’t always work when you’re on the road, especially if that road is not in your native country. At the very top of the list is how you should be using credit cards overseas, and how you should balance the use of your credit cards when traveling. I’ve written about using cash and using debit cards overseas, so it’s time to complete the trilogy by talking about using credit cards overseas.

I want to start with the following assumption, which is a biggie, but it has to be the starting point. I’m assuming you have good credit, are not already maxed out or even close to it, and that you’re not further putting yourself into debt for the sake of your travels but rather  using credit cards overseas when traveling as a convenience and as a cost saving measure..

Yes, when it comes to using credit cards overseas, those regular rules of the road still apply. Don’t charge more than you can afford to pay off within one credit cycle. Don’t treat your credit limit as an additional savings account equal to the line of credit on that card. Do know the rates and terms for the kind of purchases you’re planning to make.

However, traveling turns many of the rules of credit upside down, because in my experience, many factors behind using credit that make it your worst option at home make it a useful tool when traveling. With that in mind, I want to offer these five observations about using credit cards overseas when traveling.

1. Using credit cards overseas can me fewer fees… if you do your homework

Just about every debit card has one huge setback if you want to use it while traveling internationally (and so do many credit cards, so be careful). Foreign transaction fees. These fees usually start at 3% of the cost of whatever you are buying or the amount of cash you are withdrawing from a foreign ATM, and that’s in addition to ATM fees, bank fees, currency conversion fees and vendor fees. Your money motto when traveling should be this: no foreign transaction fees.The way you don’t pay them is by obtaining a credit card that doesn’t charge those fees. Getting a credit card with no foreign transaction fees should be one of your highest priorities before you leave home. As of this writing, Capital One is one of the financial institutions that does not charge a foreign transaction fee for many of their cards. It makes using credit cards overseas much less painful. Simply put, the best credit card for travel abroad is the one that has no foreign transaction fees.

2. More is better and safer… within reason

In the real/non-travel world, anyone who tells you to carry multiple credit cards should, at the very least, be forced to subsist on a diet of vegan hamburgers topped with beetroot and Grape Nuts… a cereal I’m not 100% sure exists anymore, but which always seemed like a punishment when I was a kid, so it should be considered one now as well. Honestly, I don’t know any other reason why that cereal was produced in the first place. Same with vegan hamburgers, actually).

But I digress.

It’s not that you’re necessarily going to use that extra card. In fact, you should plan to act as if it weren’t there at all. However, you should have one, because as mentioned above, credit cards with no foreign transaction fees are often a more economical use of your money. Further, if the card is a Visa, MasterCard or American Express, the odds are overwhelmingly in your favor it will be accepted where you need to use it.

3. Credit cards equal economical cash… relatively speaking

If you’re using credit cards overseas, and using them responsibly and with care, they are a much better alternative than debit cards if you need to get cash on the road. I’m assuming you are not using travelers’ checks, which are still the very best option, but as mentioned in a prior post, they are becoming far less convenient to obtain and to use. There is, however, a warning and a trick to getting a cash advance while using credit cards when traveling. The warning is this: credit card cash advances begin accruing interest on the balance due immediately, and on every single day any of the balance sits on your card. This bears repeating, because it’s so very important – interest is not added monthly, it’s added daily. If you obtain a cash advance, you should make it your highest priority to pay that balance off within 24 hours.

Thanks to the miracle of wifi, you should be able to find someplace to log in to your account and do this. If not, it leads to the next counterintuitive observation…

4. The customer service department is your best friend

One of the many benefits of credit card reform legislation several years ago is you can often specify which part of your credit card balance you want to pay off first. For example, if you have one purchase that occurred at a promotional rate, and another purchase at a higher rate, you can pay the balance charged at the higher ate first. Often, you have to do this by talking to a real live person, but it can be done. The twist is that this can be difficult when traveling internationally because you want to call a customer service representative in the region of the world where you are traveling, so that you don’t get charged with such a high long distance rate for the call itself that it makes the interest seem reasonable by comparison. Before you leave, confirm the toll free international number. If you get a cash advance by using credit cards overseas and you can’t pay off that specific transaction online, call that number and handle it that way.

Speaking of customer service, be sure to call your credit card issuer before you leave. Let them know where you’re going. This will help prevent being flagged as a potential identity thief when you use your card in an unfamiliar pattern, and will prevent the card being canceled, suspended or eaten by an ATM.

5. The interest rate should be the least of your concerns

This may seem like the most counterintuitive advice of all when using credit cards overseas, but as always, it comes with a few caveats. Interest should not be a concern if and only if you have budgeted your travels and you are ready, willing and able to pay off the entire balance before the end of the credit cycle. What do you care about high interest if you’re going to payoff the balance before it’s applied? Your credit card is very likely, if you’ve done your homework, helping you avoid many fees that would be applied to a debit card transaction, and offer benefits like insurance on rental vehicles that may help you avoid the rental car LDW surcharges (again, please pretty please with a cherry on top do your homework to see your particular card’s coverage).You have to weigh the benefits of using credit cards overseas against that cost of interest you should make every effort to to pay.

Of course, the golden rules of using credit never change, whether we’re talking about international credit card use or using your card at home. If you habitually charge more than you can afford to pay back before accusing interest, if you already have a high balance that is not going away and will not be made worse by your travels, and if you don’t know what the policies are for the cards you carry, no amount of advice will ameliorate the built in problems of relying on credit. However, if you plan ahead, know your budget and learn those rules of the road, credit cards can be the better option. The fact of the matter is this: credit cards, at their heart, are designed for these kinds of situations –  namely, periods when you need money you don’t have on hand, but have the means to pay back. They’re not magic bullets, they’re potential solutions to temporary problems.  So with that in mind, you can create a travel experience that works for you by using a mix of cash, debit cards and credit cards that will minimize your money worries, and maximize your travel momentum.

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