Canadian Finance Blog

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Use a Credit Card for Overseas Spending this Holiday Season Posted: 16 Dec 2010 02:00 AM PST People are often so concerned with getting the best exchange rates when travelling abroad that they convert too much of their money before leaving or waste time and effort looking for the lowest rates upon arrival. However, these efforts may only serve to negate the benefits of getting a good exchange rate to begin with. In light of this, what is a traveller to do? Don't resign yourself to costly exchange rates; instead simply use a credit card . Visa and MasterCard credit cards offer some of the best exchange rates available across any payment type and protect users from both excess foreign currency and the risk of having money stolen. Additionally, these networks are accepted in most destinations. While a credit card can be a very valuable tool for overseas payment, you must make sure to take a few steps in order to maximize its benefit. Before travelling abroad, determine if your card has a foreign transaction fee. Some credit cards have fees of typically 2-3% that are applied to payments made in another country. Not being aware of such fees can lead to an unwelcome surprise when you return home and receive your credit card statement. However, often all you must do to prevent this is call your credit card issuer and ask whether your card has any foreign transaction fees. If it doesn't, you're golden. If it does, you may want to apply for a no foreign transaction fee credit card . Unfortunately, the cards offered by major Canadian credit card issuers have foreign transaction fees. So if you live in Canada, you should apply for the card with the lowest such fee possible. While most credit cards from the U.S. also have foreign transaction fees, some do not. Therefore, if you are able to get a United States-issued credit card—through a relative or because you have dual citizenship, for example—you should apply for one without a foreign transaction fee. Before you leave, you should also notify your issuer about your trip so your card does not get suspended for suspicious use. When you get to your destination, you must also be on the lookout for something called dynamic currency conversion. What's dynamic currency conversion? Well, this is the practice of merchants offering to convert purchase totals into your home currency. When you are in a foreign country and everything seems unfamiliar, this may seem like a welcome action. Who knows, the merchant may seem very nice and you might think he or she is offering the service as a favour. Most likely, this is not the case. Merchants typically charge exchange rates that have been inflated by as much as 7% in order to profit from traveller ignorance and unfamiliarity. If you are using a credit card with a magnetic security stripe, then you must also make sure to have your passport with you whenever you make a purchase. Why? Many countries have converted to something called chip-and-pin technology. When paying with a chip-and-pin credit card, users punch in a four-digit personal identification number (PIN) that serves to authorize use. This smartcard system provides greater fraud protection than do magnetic security stripe cards, thus most merchants will require proof of identity when a magnetic stripe credit card is used. Most Canadian credit cards already use this advanced technology, so identification issues need not be a concern if you have one. As long as you make sure to avoid these simple and obvious trappings, your credit card can become an extremely beneficial tool for overseas travel. Aside from the favourable exchange rates and security credit cards provide, using one abroad might also allow you to accrue rewards associated with your account. Such a fact could become especially important this holiday season if you are planning to travel abroad to visit relatives or simply take a vacation. Perhaps using your credit card for all of your overseas spending this holiday will even allow you to earn a free trip abroad in the future. After all, it's the season of giving, so why not let your credit card give back to you? Author Bio: This article was written by Odysseas Papadimitriou, CEO and Founder of CardHub.com, an online marketplace for credit card offers and gift card exchange . Related Posts: 5 Ways to Make Your Credit Card Work For You Federal Government Proposes New Credit Card Rules Credit Card Debt Relief Options That Work Use a Credit Card for Overseas Spending this Holiday Season originally appeared on Canadian Finance Blog on December 16, 2010.

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