Pay Smart When Traveling Internationally

You have your itinerary — five countries in 10 days. You've learned to say "Do you speak English?" and “Where is the restroom?” in at least two languages. You have your passport, your AAA travel guide, and a suitcase full of wrinkle-free clothes. Now it's time to pack your wallet. What should you take — credit cards, a debit card, traveler's checks, or cash? According to travel experts, the answer is all of them.

For years, smart travelers knew that credit cards were a great way to pay abroad. A credit card was safer than carrying cash, and you got a great exchange rate in the bargain. That’s because credit card companies generally qualified for institutional exchange rates, rather than the much less advantageous rates tourists find at exchange kiosks. Unfortunately, many credit card companies have made this tried-and-true way to pay a little more costly.

Previously, MasterCard or Visa charged a 1% conversion markup to the cardholder on each foreign purchase. Now they charge the credit card issuer this 1% fee. The issuer may now charge the cardholder as much as 3% on these purchases. This is referred to as a conversion fee, charged for converting purchases made in foreign currencies into U.S. dollar amounts.

The difference — $90 on $3,000 worth of transactions, compared with $30 when the fee was 1% — may not be enough for you to leave your cards at home. But you might want to find out if one of your cards offers a better rate and use that one. You may want to consider also using a debit card overseas. Be sure to ask about fees on these cards as well.

Even with the surcharges thrown in, paying by credit card may still be cheaper than converting cash overseas. Paying with plastic is also quick and convenient, particularly in Europe, where Visa® and MasterCard® credit cards are widely accepted. In addition, many credit cards come with traveler-friendly features, such as extended protection against theft and the accidental damage of purchases. Others offer travel-accident and car-rental insurance. Paying by credit card also gives you the opportunity to dispute a bill from a foreign merchant. These vary according to country. Contact your AAA branch office or Bank of America for details.

Your best bet is to travel with a mixture of credit cards, debit cards, cash, and traveler’s checks. Be sure to make a list of the numbers of the traveler's checks and telephone numbers to call if the cards or traveler’s checks are lost or stolen, and carry the list with you at all times.

One final bit of advice: if you do plan to go overseas and use credit cards, call your card issuers in advance and let them know. Sometimes, the card may be put on hold after one or two foreign transactions until the card issuer determines that it is you using the card. If someone is not at your home to verify that you are overseas, then you could be in a real bind.