When you travel overseas and use your credit card to pay for expenses in a foreign country, you may not realize there 
are additional fees that you incur in addition to your purchases. If you spend without much thought while traveling, these fees can add up fast and leave you at risk for overspending or going over your limit.
The fees you incur are referred to as foreign transaction fees. The fees are applied because it costs the credit card company money during the currency conversion. Generally, the fee collected is 1% of the amount with some banks adding on their own fees in addition to the transaction fee with the total fee coming in around 3% of the total purchase price. Companies like Discover and American Express are examples of companies that process their own payment transactions but both also assess fees for conversions. The only major credit card company that does not issue a foreign transaction fee is Capital One.
If you are paying an additional 3% of the purchase price every time you use your card, you can quickly mess up your credit if you max out your card before you realize what is happening.
Drawbacks of Cash Advances on Credit
If you use your credit card in an overseas ATM, you are essentially taking out a cash advance. These cash advances become very expensive because not only are you paying the foreign transaction fee, you also have to pay a cash advance fee. Plus the interest rates for cash advances are typically much higher than the interest rates used for purchases. Remember too that cash advances do not have a grace period so you technically owe the money back as soon as you withdraw it.
Because of the costs of using credit cards when you are traveling overseas, it makes sense to take along a debit card as well if you need to withdraw cash. You can skip the high APR for cash advances and access cash for minimal fees.
You also should contract your credit card company in advance of your trip and let them know you will be traveling. In some cases, a credit card used overseas can be declined because credit card companies often will trigger a possible fraud scenario when the charge tries to come through. Since you aren’t normally doing your shopping in a different country, the credit card company may be inclined to think your card is stolen. Contacting your company first and providing the time line of your travel plans can help keep charges going through with hassles.
When you are talking with your credit card company, be sure to ask them if there is anything you should know about using your card in another country. There may be requirements or limitations that you need to be aware of when using your card outside of the United States.
Bring Cash Too
Travelers checks are also a good idea to carry with you on a distant trip. It can be hard to track all of your credit card spending and if you are close to your limit, you risk overspending and even the possibility of being hit with large fees for taking your card over the limits you have. Having a cash backup can eliminate the need to incur new transaction fees on additional credit cards.
Having credit cards with you when you travel is a great way to keep a security blanket for travel emergencies. But it’s best not to completely rely on credit for your travel expenses. Budget the amount of money you can spend for the entire trip and do your best to keep track of what you have been spending. If you are planning to be out of the country for a long period of time, make sure you have plans in place to pay off the balance each month in full if possible to keep your line of credit free and clear for when you need it.
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