Traveling Abroad: Payment Methods

how to pay when traveling abroad

When travelling abroad, it's important to be aware of the different payment methods available to you, as well as their pros and cons.

Using a credit card is a widely accepted and convenient form of payment when travelling. Credit cards are easy to use, provide purchase protection benefits, and often have favourable exchange rates. However, some credit cards charge foreign transaction fees, typically ranging from 2% to 3% on every international purchase. It's also important to note that not all credit cards are accepted in all countries, so it's essential to check with your credit card company before your trip.

Another option is to use a debit card to withdraw local currency from ATMs. While this can be a convenient way to access cash, be aware that ATM withdrawals may incur fees, including withdrawal fees, out-of-network ATM fees, and foreign transaction fees.

Carrying cash in the local currency is also recommended, especially for smaller purchases or when visiting shops that may not accept card payments. It's generally advisable to have enough cash to cover the first 24 hours of your trip and to use ATMs from your home bank's network or partner banks to avoid additional fees.

Other payment methods, such as bank wire transfers, prepaid debit cards, remittance services, and traveller's cheques, can also be used when travelling internationally, each with its own advantages and disadvantages.

Ultimately, it's a good idea to have a mix of payment options when travelling abroad to ensure you're prepared for various situations and to minimise any additional fees.

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Using a credit card

Choose a card designed for travel

If possible, opt for a credit card designed specifically for travellers. These cards often come with benefits such as no foreign transaction fees, which can save you money. Some travel credit cards also offer perks like travel insurance, trip interruption or delay coverage, car rental loss and damage coverage, and airport lounge access.

Notify your card issuer

Before your trip, be sure to notify your credit card issuer about your travel plans. This will help prevent your card from being flagged for suspicious activity or frozen due to potential fraud. Most major banks allow you to set a travel notification online, where you can input the countries you plan to visit.

Avoid foreign transaction fees

Foreign transaction fees can add up quickly, with some cards charging up to 5% on every foreign purchase. Look for a credit card that does not charge these fees. If your current card does charge them, consider applying for a new one specifically for travel.

Avoid dynamic currency conversion

Dynamic currency conversion is a feature that allows you to make purchases in a foreign country using the currency of your home country. While this may seem convenient, it often comes with an inflated exchange rate and added fees, making the transaction more expensive. Instead, opt to pay in the local currency to get a better rate from your bank.

Know your card's protections

Many credit cards offer a variety of travel protections and benefits that you may not be aware of. These can include travel insurance, trip delay reimbursement, baggage reimbursement, and travel emergency assistance. Familiarise yourself with your card's protections before your trip so you know what to do in case of any delays or emergencies.

Bring a backup card

It is always a good idea to bring more than one card when travelling internationally. You may lose your primary card, or it may not be accepted everywhere. Having a backup ensures you always have a way to pay. This could be a second credit card, a debit card, or a prepaid card.

By following these tips, you can make the most of your credit card when travelling abroad and ensure a smooth and worry-free trip.

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Using local currency

When travelling, it is always a good idea to carry some cash in the local currency of your destination. While credit and debit cards are widely accepted, there may be times when you need to pay in cash, such as when taking a taxi or paying for a meal at a local restaurant.

One option for obtaining local currency is to use your bank to complete an international wire transfer. This method is secure, but it can be expensive and time-consuming. You will typically need to pay a flat fee of around $30 to $80, and the transfer can take up to five business days to complete.

Another option is to use a credit or debit card to withdraw cash from ATMs at your destination. This can be a convenient way to obtain local currency, as ATMs are widely available in most countries. However, keep in mind that there may be fees associated with ATM withdrawals, including charges from your bank and the local bank.

If you plan to use your credit or debit card for purchases while travelling, it's important to notify your card issuer in advance. This will help prevent your card from being flagged for suspicious activity and potentially being frozen. When using your card, always choose to pay in the local currency rather than your home currency to avoid additional fees and unfavourable exchange rates.

In some cases, you may also want to consider using a prepaid debit card. This can be a good option if you want to avoid carrying large amounts of cash or using your primary debit or credit card. However, prepaid debit cards typically come with activation fees, monthly fees, and transaction charges, so be sure to factor these costs into your decision.

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Bank wire transfers

The cost of a bank wire transfer can be high, with US banks charging fees ranging from $30 to $50. Additionally, the receiving bank may also charge a fee, typically between $10 and $20. It is important to note that up to three intermediary banks may also charge fees, so the total cost of the transfer can be significant.

In terms of timing, bank wire transfers can take anywhere from one to five business days to complete. This is because the transfer often has to travel through multiple banks before reaching the recipient.

To initiate a bank wire transfer, you can use your bank's online services, go to a branch in person, or call the bank over the phone. When using online services, you will typically need to log in to your account and find the wire transfer section of the bank's website. You may also need to set or check your online transfer limit, which is often $5,000. If the amount you want to transfer exceeds this limit, you will need to contact the bank to authorise the transaction.

While bank wire transfers can be a reliable method for sending money abroad, they may not be the most cost-effective or fastest option. There are alternative transfer services available, such as PayPal, Wise, and Western Union, that may offer lower fees and faster transfer times.

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Prepaid debit cards

Prepaid cards are a good alternative to credit cards, but they can be expensive. You'll usually have to pay an activation fee of around $20, as well as a small charge of 1-3% for each transaction. There's also usually a monthly fee of $4 to $10, and you may be charged extra if you don't make a transaction on your card for six months.

One of the main benefits of prepaid cards is that they are secure. If your card is lost or stolen, you can block it immediately and protect yourself from unauthorised use of your account. Visa, for example, offers a 24/7 customer service centre that will send you a replacement card or emergency cash advance.

Another advantage is that prepaid cards are independent of your bank account. This means you can only access the funds you deposited on the card before your trip, which can be a good way to budget and manage your travel expenses.

Prepaid cards are also a good way to avoid the hassle of exchanging money before you go abroad. You can skip the currency exchange line and shop like a local using your card, or withdraw local currency at ATMs worldwide.

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Remittance services

A remittance service allows you to convert your domestic currency into a foreign currency of your choice, which you can then send to a designated recipient or to yourself. You can do this by creating an account with a remittance service provider, either online or via an app, and the transfer can be completed within a matter of minutes.

There are typically two fees associated with using a remittance service. The first is a transaction fee, which is usually a percentage of the total transaction amount and can range from 1-5%. The second fee is a margin on the exchange rate, which is also usually between 1-5%.

Some popular remittance service providers include:

  • Western Union
  • Wise (formerly TransferWise)
  • Xe
  • PayPal
  • WorldRemit
  • U.S. Postal Service money order

Frequently asked questions

There are several ways to pay for things when travelling abroad, including credit cards, local currency, bank wire transfers, prepaid debit cards, remittance services, traveller's cheques, and cryptocurrencies.

Credit cards are widely accepted, easy to use, and provide purchase protection benefits and favourable exchange rates. However, some cards charge foreign transaction fees, typically 2% to 3% on every international purchase. It's important to check with your credit card company to confirm that your card can be used abroad and to understand any associated fees.

Using local currency can help you avoid hidden exchange rates and fees associated with paying in your native currency. However, exchanging money at exchange desks or kiosks can be costly, and it's important to be mindful of ATM withdrawal fees and foreign transaction fees when using a debit card to obtain local currency.

Alternative payment methods include bank wire transfers, prepaid debit cards, remittance services, traveller's cheques, and cryptocurrencies. These methods may have lower fees or more favourable exchange rates compared to traditional credit card or cash transactions. However, it's important to research and understand the pros and cons of each method before use.

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