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So, how do you plan to pay for things once you are at your destination? We are so accustomed to using credit and debit cards that we often don’t even think about it. But as you head off to a foreign country, you do need to think about it.
There are a number of things to think about as you consider using plastic in foreign countries: fraud risks and protections, the cost of foreign exchange premiums, any miles or rebates you earn from your cards, and whether the merchant will give you a discount for paying in cash.
You will be able to use your Visa and MasterCard credit cards in many places in Asia. In most countries, credit cards are accepted by hotels, many restaurants and many stores. Street sellers typically don’t accept credit cards, nor do food stalls and such. American Express cards are typically accepted at international hotels, but few other places.
Fraud protections and risks
First of all, there are differences between credit and debit cards. A debit card subtracts your purchases from your checking account immediately. A credit card bills you once a month. But there are other differences as well. If you pay with a credit card and there is a problem with your purchase, your credit card company can help you with it. Not so for a debit card.
Also, if your card is lost or stolen a credit card company does not hold you liable for fraudulent use if you notify them promptly. You do not need to pay any disputed amounts on your credit card. With a debit card, the money is subtracted from your account immediately, and if the use was fraudulent, you can dispute it, but the bank will take time before they re-deposit your funds in your account. If your card is used fraudulently, the thief can empty your account and it may be some time before you get your money back.
Foreign Exchange premiums
Consider the foreign exchange premium on your cards. Generally, the premium ranges from 1% – 3% of the amount charged. Compare the foreign exchange premium with the premium you pay on ATM withdrawals. This can help you make the most economical decisions about how to pay for things. But the foreign exchange premium isn’t the only factor to consider as you choose how to pay for things.
Frequent flier miles, hotel points and rebates
Does your credit card earn you miles? If so, that can change your computation about how to pay. Generally frequent flier miles are considered to be worth 2 cents a mile. The miles may be worth more or less, depending on how you use your frequent flier miles. Figure out how much each mile or hotel point is worth to you.
If you use your frequent flier miles for short domestic flight they are worth less than 2 cents a mile. If you use your miles for premium tickets on international flights or upgrades on international flights, they are worth substantially more than 2 cents a mile.
Do you have a cash rebate card? Consider that in your calculations as well. My American Express card pays 1% on most purchases, but 2% on travel-related expenses such as hotels and 3% on restaurant meals. Since the foreign exchange premium is currently 2.5%, it is worthwhile for me to use my card for hotels and restaurant meals.
Discounts for cash
You will find that many merchants will give you a discount for not using your credit card. Such discounts are often in the 2% – 5% range. Not all merchants will offer discounts and generally hotels and restaurants do not offer discounts. If you are willing and able to pay cash for a purchase, it never hurts to ask for a discount. Begin by presenting your credit card. Sometimes the merchant will volunteer a discount if you pay cash, but if not, do ask.
Inform your financial institutions of your travel plans
For all cards – debit, credit and ATM cards – you must inform the issuer of when and where you are traveling so your card is not “turned off” for suspicion of fraud. You should also have a phone number for every card issuer that you can call collect 24 hours a day from anywhere in the world in case there is a problem.
On occasion, you may find that a financial institution will not allow their cards to be used in a country that consider to be high risk for fraud. Make sure you check on this long before your trip so you have the time to obtain a card you can use in your destination country.
What to do if your cards are lost or stolen
You want to inform the issuer of a lost or stolen card as soon as your realize the card is gone. The 24-hour phone number mentioned above is the way to do this. One way to make sure you have the 24-hour phone number as well as all of your card numbers is to email yourself an image for the front and back of each of the credit, debit and ATM cards you use.
Where you cannot use credit cards
No credit/debit cards can be used in Burma (Myanmar) and there are no ATMs. If you are traveling to Burma, you may want to pre-pay any hotels that you can, often by using a booking service, as you generally cannot use credit/debit cards within the country.
