When used wisely, credit cards are a traveller’s best friend. Some are more friendly than others though, so if you’re researching which card to pack, ask these 5 questions first.
A travel-friendly credit card can be worth its weight in gold, or would that be plastic? As part of your travel money toolkit, a credit card gets you out of carrying loads of cash around, lets you book hotels, restaurants and flights online, and is a lifeline in a serious emergency.
Credit cards come with a few catches of course, like that familiar sting in the tail known as ‘interest charges’. When travelling, there’s also a particularly important sting to look for, namely ‘foreign transaction and currency conversion fees.’ You’re going to want to avoid paying these. So if you’re in the process of applying for a credit card for travel, ask these 5 questions before signing on the digital dotted line.
1. DO YOU CHARGE A FOREIGN TRANSACTION FEE?
Some credit cards charge fees of around 2% – 3% on purchases made overseas in what’s known as foreign transaction fees and currency conversion fees. At the top end of the scale, a 3% charge means out of a spend of $1000, you’re giving your credit card issuer a tidy $30 for the pleasure of using their services. We’re sure you can find a far better use for that money, so make sure to look for a fee-free card.
As an additional bonus, these sorts of credit cards are great for online shopping back home in Australia – helping you dodge the international transaction fees that come with buying from overseas online stores.
2. DO YOU CHARGE ANNUAL FEES?
Foreign transaction fee-free credit cards are unfortunately a bit or rarity and typically come with an annual fee. The good news is, credit cards that don’t charge a yearly service fee as well as the fee for making international purchases do exist! So if your credit card company wants to behave like a too-cool-for-school nightclub and charge you the equivalent of a cover charge just to walk in the door, perhaps it’s time to take your business elsewhere.
3. DO YOU OFFER LOW INTEREST?
Now it sounds like we’re hunting for a travel-friendly credit card unicorn, because the trifecta of low interest + no foreign transaction fees + no annual fee is pretty rare indeed. Higher interest rates are sort of the price you pay for the travel perks of no international transaction fees.
Still, within the travel-friendly credit cards currently on offer, there is room to move, so compare contenders carefully and take note of who is charging less interest.
Ditto with interest-free periods: don’t settle for an interest-free period of less than 55 days and make sure know when your balance is due as you could start racking up interest charges of 15 to 21 % depending on the card.
The ideal way to think about travel-friendly credit cards however is to use it like a debit card. Load your credit card up with your own money so that you never have to worry about interest in the first place.
4. WHAT ARE YOUR ATM FEES LIKE?
Whether in Australia or overseas, you really don’t want to be using your credit card for cash advance at an ATM. Each ATM trip could cost a small percentage of the transaction’s value, which can quickly add up. You might even get charged for using an ATM to check your balance, the cheek! So try to avoid overseas ATM’s and know what the costs are in the event that you absolutely have to.
Side note: If you’ve pre-loaded funds onto your credit card and want to use it at an ATM to draw your own money, a couple of banks won’t charge an overseas ATM withdrawal fee, so ask the question.
5. WHAT ARE YOUR SECURITY FEATURES?
There’s rarely any shortage of enterprising locals happy to take advantage of unwary travellers, so make sure your credit card isn’t the type that criminal can go to town on. While Chip, PIN and anti-fraud technology are standard features on all credit cards, the real thing to look for is how secure your credit card is online. Features like automatic logout will bump you out if you leave your internet banking idle for too long while SMS codes act as a one-two punch to allow you to authorise your transaction from another source.
Just keep in mind that if you’ve got yourself a local SIM overseas those text messages will go through to your Aussie number.
Credit cards are super handy overseas provided you have the right one in your wallet, and use it carefully:
- Avoid paying extra at each transaction with a credit card that doesn’t charge foreign transaction or currency conversion fees.
- Use your credit card for larger purchases only, and don’t use it at the ATM – overseas cash advance and ATM fees apply.
- To avoid getting stung by interest, treat your credit card like a debit card.
- Pre-load your credit card with small amounts of your own money – as you need it.
- Pay your balance in full each month. Comb over your statement to find the full balance owing, not the minimum balance which is usually the more prominent figure.
Go smarter with Travel with Jane travel insurance.
This article is for your general information only and is not financial advice. It does not take into account your personal circumstances, and you should obtain independent advice.