With the holiday season upon us, many Canadians plan on vacationing outside of the country and they’ll likely be using their credit cards.
The most obvious advantage of using credit is the fact that you don’t need to carry large sums of money around. Any major expense can be put on plastic. Although fraud should always be a concern, credit cards have a zero-liability policy that will protect you if there’s ever a fraudulent charge on your account. When managed responsibly, credit is a useful tool at home and abroad.
Getting your credit cards in order
Before you depart, you must inform your credit card providers about your travel plans. Fraud is taken very seriously and a purchase in a foreign currency will be flagged immediately if your credit card provider doesn’t know that you’re travelling.
Another important thing to do take care of before departing is to make sure your PIN numbers are only four digits. Five or six-digit PINs might offer more security, but international four-digit PINs are the standard so you don’t want to take the chance of your cards not working.
Unfortunately, you also need to prepare for the worst. You should always scan both sides of credit and debit cards. If your cards are ever lost or stolen, you’ll have all the relevant information and contact numbers on hand.
Take advantage of credit card benefits
One of the most popular reasons to use credit is the ability to accumulate points which can be used towards travel. Signup bonuses can be pretty generous and if you charge most of your day-to-day spending to your cards, you can rack up a ton of points fast, which can be redeemed for airfare or accommodations.
The travel insurance benefits offered by credit cards can also be very attractive. When travelling, having a travel medical insurance is a must. Fortunately, it’s a standard benefit with most travel reward credit cards. Trip cancellation/interruption and lost or delayed luggage insurance are pretty common benefits, too. But not every card includes them so you should check your policies to find out what’s covered.
Keep in mind that you usually need to book your travel on the credit card that offers the travel insurance benefits to be fully covered. This isn’t always the case so you need to read the fine print.
Use credit effectively when abroad
Did you know that credit cards add an additional 2.5% to 3% on top of the spread whenever you charge something in a foreign currency? This may not sound like a lot, but it can certainly add up in the long run. To avoid these fees, simply sign up for a no foreign exchange fee credit card and use it when making purchases in a foreign currency.
Even with a no foreign exchange credit card, you can be caught paying more. Some merchants will give you the option of being charged in the local currency or your home currency when using credit. Although it may be tempting to pick your home currency since it’ll show the exact amount you’ll pay, you should still always pick the local currency since it’ll be cheaper. The home currency rate is set by the merchant (known as dynamic currency conversion), and it will always be the more expensive option.
Using credit abroad is incredibly convenient, but just like at home, you need to be mindful of your spending so you don’t blow your travel budget. No vacation is ever worth it if you end up paying interest charges months after you return home.