How to pay when traveling

How to pay when traveling? It's a frequently asked question. Since it's been a while since we wrote about it in this blog, it's time for an update.

The other day, I came across an article about credit card fees. The article, "Fleeced when using a credit card overseas" indicated cases where credit card companies add an unauthorized foreign transaction fee. It's worth a read. But don't be discouraged from using your card.

Using a credit card when traveling

Our preference is to pay as much as possible using a credit card. Here's why:

• Protection - most cards will protect you against fraudulent charges
• Convenience - no need to fumble with different currencies
• We get a free 30 days float on our money
• We get credit card points which quickly convert to cash savings.
• With our statement, we get a complete listing of all transactions. We know exactly what we spent on and how much.
• Cost - In most cases it's better to pay in the local currency and use the credit card's conversion rate. There's two alternatives to this. First, you could use your credit card and pay in US dollars. In this case you're using the local conversion rate vs a credible US bank conversion rate. I tend not to trust local conversion rates. Second, you could use cash. But that means paying a currency conversion fee in addition to a steep currency conversion rate, which is virtually always more expensive.

Get the right credit card

What this means, though is that you need to be prepared before you go.

First, you need to have the right credit card. There's many types of cards and there's no best one for everyone. Depending on which card, you'll likely get 2x or 3x points on travel (and dining). Each card is different but some cards are very easy to move points around between specific uses (airlines, hotels, etc). We choose cards that have zero foreign transaction fees included. And they do carry some insurance as well.

But make sure you watch out for unauthorized fees described in the article referenced at the start of this post. We have never seen those fees but it pays to be vigilant.

We pick a card with a low annual fee but really don't worry about the APR. Why? Read on.

How to pay when traveling? Get the right mentality

Why don't we consider APR (interest rates) with our credit card choice? Because we always payoff our card 100%. Each and every month, the card automatically is paid off from our checking account. That's what I mean about getting the right mentality. If you're going to use a credit card for most purchases, then you really need to pay it off religiously. Otherwise, the interest rate will quickly drive up your costs, and you would be better off using cash.

But sometimes you just need cash

Sometimes, you just need cash. Maybe it's for tips or maybe the small store doesn't accept cards. Sometimes the machine is down and/or your card is just not working well on the store's card reader. So we typically carry around a little local currency.

We never go to a currency conversion store or bank to change our US dollars into local currency. Instead, we head to the local ATM and withdrawal directly from our checking account. Sure there's a 2 - 3$ transaction fee. But there's no conversion fee at all. No bid / ask rate either. It's pretty straight forward math really - the ATM is a much better deal.

You should use caution when using a foreign ATM machine. First, choose what looks like a reputable machine. We tend to use the ones located in airports and look for the signs from the major banks. Next, make sure your card is not being skimmed. This article provides a nice overview of how to protect yourself. We basically make sure nothing wiggles and cover up our PIN number.

What to do with too much cash

We don't take out too much cash at one time. We typically start with $100 worth of local currency. If you leave the country with lots of currency, what can you do with it?

• Save it for next time. That's what we do with Euro's since we travel to the Eurozone frequently.
• Purchase last minute gifts at the airport (or even a snack for the ride home).
• Convert back to US dollars. After leaving the Czech Republic, there's really nothing you can do with the local crown currency. So then we're stuck at the currency exchange booth, getting ripped off in fees. But it's better than bringing back a bunch of worthless paper and coin.

For more information:

So, how to pay when traveling? Credit card please. Questions? You can always contact me directly. This is just one of the many services a great travel agent provides - to answer your questions.

Here's some other articles you might find useful:

• Currency conversion tips
• Trip preparation tips
• Four tips for smart trips