I think there are two kinds of people when it comes to spending money in a foreign country: those who don’t think twice about what card to use or how to exchange money, and those who constantly fret that they are messing things up and getting screwed over by the banks. I tend towards the second group but I’m channeling that concern into research so maybe these tips will help you as much as they help us.
I’ll cover four main topics in this post:
- Dealing with cash
- Paying with debit and credit cards while abroad
- Minimizing risk of fraud
- Making Big International Payments (like reserving a house)
As a prelude to these topics: it never hurts to inform your bank and credit card companies that you will be traveling abroad, along with specifics on the countries. This can help prevent false fraud alarms which could lock up your account until you take action.
Dealing with Cash
My first preference with cash is to not use it at all. The more cash I’m carrying around when traveling abroad, the more likely something bad will happen (loss, theft, too much leftover when I return). Still, carrying around zero cash is also a terrible idea. It helps to know the lay of the land where you will be going and how cash-based the society is. Whatever cash you do decide to carry, keep it safe and consider dividing it up into a few different places.
Julie and I will be doing a lot of public bus transportation around Ireland. From what we can tell, cash will be important for paying fares from town to town. If we were going to be focusing our time in Dublin or another major city, we could buy a Leap Card (with a credit card) and just swipe the card when we got on and off buses. Also, we will be spending a lot of time in smaller towns as we hike along the national ways. Cards may not be as welcome in some of the shops we will visit.
So, I suspect we will keep around €100 (maybe a bit less) on us at all times, with small bills and coins for making exact change on buses. We will make this last as long as possible and pay with credit cards whenever we can.
My preferred way to get cash is to find a regular bank ATM and use my USAA debit Mastercard. USAA is pretty amazing in this regard: they will refund bank fees to me, and offer a very favorable currency conversion rate. My experience is that this is much more likely to get a better conversion rate than bringing US $ into country and exchanging them at a currency exchange vendor (especially at the airport!).
Using Credit and Debit Cards for Payments
The landscape and technology for payment card point-of-sale is changing dramatically. I remember visiting Paris in 2008 with the family when Julie and I noticed the then-new bike rental program. You paid at an unattended kiosk and it required “chip & PIN” card for payment. None of our cards would work (we tried), and I wondered if we’d ever be able to take advantage of POS (point-of-sale) systems like this in the future. Seven years later, the answer is still “mostly NO” but things have improved a bit.
Most credit card issuers in the US are now offering cards with an embedded chip that adheres to international standards. I’ll talk more about the security benefit of this in the next topic, but for the purpose of this topic it is enough to know that a card with a chip (vs. just having a magnetic stripe on the back) is more likely to be compatible with payment systems abroad. I say more likely because most of the US based cards are chip and signature, meaning that to complete a transaction only a signature is required. In most human-attended points of sale (restaurants, stores, hotels) this should work fine. Automated kiosks, however (ranging from the Paris bike rental to a Coke machine) will likely still reject the chip and signature cards. Very few banks in the US are offering chip & PIN cards. This might change over time depending on where retail POS systems go. More and more I’m finding it possible to use my chip instead of the magnetic stripe when making payments (Walmart, Target for example).
Beyond the compatibility issue there looms the other big question: will my credit card company screw me over with fees? Do your homework here and make sure you get a card without foreign transaction fees. I love USAA but their rewards USAA Mastercard credit card charges a 1% foreign transaction fee. I’ll be leaving that card behind (but bringing my USAA Mastercard debit card to use only for cash ATM withdrawals).
Instead, I’ll rely on two cards that do not charge any foreign transaction fees: Chase Sapphire Preferred Visa and Platinum Delta SkyMiles American Express. I have both cards for very specific reasons (I do light-weight credit card churning as a hobby, but that’s a subject for a later day): the Chase card gives a nice 2x point multiplier for travel purchases, and need to hit a spending threshold on the Delta card to retain an elite status level on Delta Airlines for one more year. Both will give competitive exchange rates without charging me any extra fees. And I like having both an American Express and a Visa in case the merchant only accepts one or the other.
Summary: do your homework and make sure the card you will use for payments doesn’t charge a foreign transaction fee. If it does, look for a card that has at least chip & signature technology with no foreign fees.
Minimizing Risk of Fraud
I was the Chief Technology Officer of an online banking software company for over five years, and it often surprised me how concerned many people were with banking online. I was surprised because these same people generally had no problem engaging in the single riskiest financial behavior you can imagine: handing over a credit card with a magnetic stripe to a server at a restaurant. Credit card skimming is so easy for fraudsters to deploy – the technology is cheap, and once you have someone’s card from the mag stripe with other key information (the “secret” code printed on the back, expiration date, cardholder name) you can easily print a fake card or use it online. Oh, and did you hear about the theft of card data at Target and Home Depot in the past two years? Same issue, though a much more elegant attack.
This is where the chip technology can help you out: if you only make payments using the chip on your card, you are much less likely to see subsequent credit card fraud on your account. The chip generates a one-time payment authorization that would be worthless to a fraudster in a future transaction.
The very fact that most European points of sale bring the terminal to you (payment at a restaurant, for example) help prevent fraud. If you have a chip card, use the chip and not the stripe whenever you can.
Making Big International Payments
For the final ten days of our Ireland trip we are renting two different houses for ten people: one in Dublin, and one in Flemingstown. While the Flemingstown house allowed me to reserve it using a credit card without additional fees (score!), if I had paid for the Dublin property with a credit card there would have been a 3% surcharge (meaning I am paying their merchant fee). PayPal would have incurred a 5% fee. Instead, I used TransferWise which is a relatively new online service. They will do a direct debit from your checking account and ensure the money lands where it is supposed to. They are effectively operating like a bank and I suspect their model is to keep funds deposited in key currencies in different zones (USA, Euro, United Kingdom, India, etc.) so that they don’t actually have to move the money. Whatever their business model, I saved about $50 on a €1,500 transfer six months ago - and that’s just savings over doing my own international wire transfer, let alone additional fees they would have charged if I used a credit card.
To summarize: use my tips here to guide your research, but do your own homework. Do an online search or call your credit card issuer to see if there’s a foreign transaction fee. If there is, and you like the issuer, ask them if you qualify for a card that doesn’t have one. Don’t bother with traveler’s checks or bringing a lot of cash with you: just use an ATM to withdraw cash in country once you land.