Before jetting off to tour Asia or backpack through Europe for your next adventure, you may find yourself caught in a dilemma on how to pay for your travel expenses incurred through transactions with merchants at the holiday destinations that you are heading to. You may ask yourself, what is the best way to pay all of these merchants? Would it be cash, cheque or a credit card?
Here are five tips that you can follow to fully maximise credit overseas.
1. Choose The Right Card
Before you start using your credit card all day every day abroad, understand how your credit card company may apply foreign transaction fees. Stop to read the fine print. Does your credit card charge any fees that you did not know about? Watch out for the hidden fees and train yourself to avoid those pesky charges.
Many credit card companies charge a fee for transactions performed abroad, usually 2%-3% of your total purchase. It may not sound like a hefty charge but why spend more when you don’t have to? Take for example, a total sum of $5,000 was charged to your credit card on hotels, taxis, restaurants and other expenses as you tour around London. Foreign transaction fees would amount to $150 in additional costs. That vacation you took may have cost you more than you think.
Consider applying for a credit card suited for overseas use and does not charge a fee for foreign transactions could save you hundreds annually.
2. Let Card Issuers Know You're Travelling
Notify your bank or credit card company of the dates of travel and exact countries that you will be travelling to before you leave. Unknown foreign purchases are a red flag for fraud and doing so will increase the possibility of your cards being restricted while you're away. Do let your bank know where and when you’re leaving so that everything will run smoothly. At the same time, remember to enable the magnetic stripe on your card for overseas use.
Keep track of the hotline number to call if you need to report a lost card when on vacation.
3. Limit the Amount of Cards
More cards and higher credit limits could trick you into spending more abroad. If you are not careful, you could end up overspending. Also, this increases the odds of not paying one of your credit bills on time. A missed credit card bill payment will have the greatest and longest lasting impact. The more recent the missed payment occurred, the greater that impact will be, and the more missed payments you have, the longer it will take to recover. This can have an adverse effect on your credit report and impair your credit reputation as lenders will check your credit file to assess your credit worthiness prior to making a decision for future credit facilities. Having a good credit repayment history is important.
When you are out travelling, always approach credit use with moderation. Limit your credit cards to a minimum and keep your spending in check with a log of all of your travel purchases. It is also wise to store financial information on an encrypted USB thumb drive along with your passport.
4. Watch your spending
You do not simply want to whip out your cards to pay for everything abroad. Commit to writing every cent spent. Manage within your credit limits and reserve a percentage for emergencies. This helps to generate a sustained history of on-time repayments on your credit report and make positive behaviour in your favour moving forward.
At the same time, keep a receipt for your purchases. Consider checking your bank and credit card accounts regularly while you’re travelling to ensure that all credit activities are yours. This has the added bonus of helping you to keep tabs on your spending. How you charge your travel purchases to your credit card and pay off your credit card debt every month will determine your credit standing and show how much of a credit risk you are. Where possible, measure and track your credit and financial progress over time.
If you have any charges that you do recognise, call your bank or card issuer and report the illegal activity immediately because time is a factor.
5. Protect your credit back home when overseas
Do not get carried away preparing for a trip abroad that you overlook to add ways to protect your credit to your list.
With the fraudulent use of identity cards and credit cards occurring with widespread internet usage of information being exchanged and transacted on a daily basis all around the world, it is important to monitor your credit to prevent the potential likelihood of identity theft occurring. Check out CBS’ credit monitoring services to notify you against identity theft when overseas.
The earlier you catch an activity by an identity thief or fraudster who has stolen your personal information and used it to take out a loan or open up a credit card in your name, the easier it will be to restore your identity and financial life.
Committing to the above is the absolute best thing you can do for your credit. This will enable you to use credit to work harder for you, rather than becoming a slave to credit.
At the end of the day, a trip overseas should not be characterised by concerns over conversion rates, handling foreign money and settling late payments. Prepare the right spending vehicles before leaving, allow your focus to shift to its rightful place. This helps to manage a very important part of your financial situation – your credit reputation.
This article was contributed by Credit Bureau (Singapore) Pte Ltd