When you're planning a trip to another country, talking with someone who has recently visited your destination can be one of the best ways to gather intel on what to bring — and what to leave at home. It only stands to reason that when it comes to paying for purchases overseas, it helps to talk with a traveler who knows the ropes.
During the past two decades, Kathleen Peddicord has traveled to more than 50 countries. An American citizen, she still keeps financial ties to the U.S., and as publisher of Live And Invest Overseas, she educates Americans on how to live and retire all over the world. So she's well acquainted with the ins and outs of using credit and debit cards when traveling abroad.
Here she shares five of her top tips for traveling with plastic, along with some traps to avoid.
1. Use the Right Card
While using a debit card helps you avoid the risk of overspending and returning home in debt, Peddicord recommends against using debit cards for purchases overseas "except as a last resort." She says they are too easy to clone and if your cards are fraudulently used, "it takes time to get cash credited back to a debit card account," she warns. "Meantime, you don't have access to that cash. Use a credit card for all purchases and your debit card for ATM withdrawals only," she suggests.
When you do get money from an ATM, examine it carefully to make sure there isn't a skimmer attached. These devices steal card information, allowing crooks to make copies of a card and drain the account. Also be sure to take your card at the end of the transaction; older machines still keep the card until the transaction is completed, and it's easy to walk away and forget your card, "leaving it in the machine waiting for someone to come along and grab it. This isn't uncommon," she says.
2. Watch Out for Fees
Before using a credit card overseas, find out if the issuer charges foreign transaction fees, which can add 2% to 4% to each purchase. Peddicord recommends using a card with no foreign transaction fees, such as Capital One or Barclays. Discover cards also do not carry foreign transaction fees and there are others. (Here are some of the best travel credit cards.)
If you plan to use a debit card to get cash at ATMs while you are on the road, check the financial institution's fee schedule first. There may be three charges for using an ATM overseas: one for using an out-of-network ATM, another one for using your card overseas (similar to a foreign transaction fee), and still another may be charged by the owner of the ATM.
A few financial institutions don't charge fees for using an out-of-network ATM. "Schwab credits you when you are charged a fee, automatically refunding any ATM fee you are charged when you don't use one of its bank machines (PLC Bank)," Peddicord says. "Another bank that credits ATM fees is Everbank. This is an online bank with its only branches are in Florida."