Traveling comes with the promise of adventure and excitement. However, you also have to prepare the logistics of traveling to a new country or area. This requires withdrawing more cash if traveling domestically or converting your cash into local currency if traveling internationally. However, another option is to use your credit card. Here are 6 reasons why you should use your credit card while traveling.

credit card travel

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Reason 1: Fraud

Reason 1: Fraud

By avoiding using your debit card, you minimize the risk of someone getting immediate access to your finances, if your debit card is ever stolen or lost. By choosing to use a credit card, you have an additional level of security while still maintaining the ease of payments. Furthermore, if you see one fraudulent charge on your account, you can freeze and cancel your credit card immediately. This minimizes the damage incurred on you and onto your credit score.

Reason 2: Spontaneous Purchases

Reason 2: Spontaneous Purchases

When you travel to a new place, you may not always precisely budget for everything you want to buy. Having a credit card allows you one additional form of payment. This especially comes in handy if an unexpectedly large purchase opportunity arises. Remember, never spend beyond your means to avoid credit card debt.

Reason 3: Freezing Your Funds

Reason 3: Freezing Your Funds

If you use a debit card to make flight or hotel reservations, for example, the merchant usually freezes the amount of the transaction. This limits your cash on hand and available for withdrawal. However, for reservations made with a credit card, the transaction is usually charged at the time of departure. This allows you additional time to reassess your budget while on vacation.

Reason 4: Travel Insurance

Reason 4: Travel Insurance

When you use your credit card to book travel online, you may unlock complimentary travel perks of your credit card. For example, some Visa credit cards offer free travel insurance and even rental car insurance. Of course, each credit card is different. Be sure to contact your credit card issuer to fully understand what travel perks your credit card offers and the process of activating them.

Reason 5: Other Travel Perks

Reason 5: Other Travel Perks

Along the same lines as complimentary travel insurance, there are some other travel-related benefits that come with your credit card as well. A few include extra baggage loss insurance, emergency interpretation services, medical transportation assistance, no baggage fees, tracking assistance for lost luggage, and free access to airport lounges. Being able to relax in an airport lounge while waiting for your flight just, seems like a great perk for simply using your credit card to purchase your plane ticket!

Reason 6: Automatic Foreign Transaction Conversion

Reason 6: Automatic Foreign Transaction Conversion

Credit card purchases made in the local currency are automatically converted to your country’s default currency. Additionally, credit cards offer better rates of exchange than the airport kiosks. Converting your cash at the airport is notorious for poor exchange rates and additional fees.

To save even further, choose a credit card with no foreign transaction fees. Part of the fee is charged by the credit card network, such as Visa or MasterCard, while the other part is charged by the card issuer company, such as Citibank or OCBC, for purchasing something in a foreign currency. Usually, this fee is approximately 3% percentage of the purchase price. To minimize this charge as well, find travel credit cards that offer a lower foreign transaction fee. For example, the HSBC Advance Visa Platinum card charges 1% of the FX fee. This means that the bank is not charging the fee. You are only paying the cost associated with the card networks, such as Visa and MasterCard. It is best to look at your card’s terms and conditions to find the best offer.

Reason 7: Safer Travel

Reason 7: Safer Travel

Most criminals target travelers. This is especially true when we fumble for money when checking out. Cash makes you a bigger target. If it’s ever lost or stolen, you will probably never see that money again. However, credit cards are easy and convenient. Plus, if your wallet is ever stolen, you can immediately cancel your card. Hopefully, you will do it in time before the thieves go on a shopping spree.

Reason 8: Earn Rewards

Reason 8: Earn Rewards

If you are an advent traveler, you probably also have a travel credit card. This allows you to rack up points for things you would normally buy. For example, the DBS Altitude card offers 1.2 miles per S$1 spent locally, but 2 miles per S$1 spent overseas in foreign currency! As a result, you are earning more miles per S$1, by traveling in a foreign country!

Dynamic Currency Conversion: Charges in SGD vs Local Currency

Dynamic Currency Conversion: Charges in SGD vs Local Currency

When shopping in a foreign country with your credit card, the merchant may ask if you want to pay with SGD instead of the local currency. This is known as Dynamic Currency Conversion or DCC. This sounds like a good idea, however, it is best to avoid this. When you use DCC, you will be charged high exchange rates. The merchant gets to set the currency exchange rate manually. Furthermore, the DCC is not free of foreign transaction fees because the transaction still passes through a foreign bank. Therefore, it is still considered a foreign exchange. You always have the right to turn down a DCC from the merchant. Some merchants will tell you it is required. However, the merchant receives a profit from the high exchange rates.

Aaron Wong, who runs the blog milelion.com, says: “If you're using Visa, tell the customer service officer to look for Reason Code 76: incorrect currency or transaction code or domestic transaction processing violation. This is the internal code that Visa uses when merchants refuse cardholders the choice of paying in the local currency. If you're using MasterCard, tell the customer service officer to look for Reason Code 4846, the code used when the cardholder was not given the option of choosing the currency that the transaction was completed in, or did not agree to the currency of the transaction.” If the DCC is still forced on you, you can file a complaint with Visa, MasterCard, or your bank.

Final Thoughts

Final Thoughts

It is always good to have cash in the local currency because not all stores, restaurants, and modes of transportation accept plastic. However, there are numerous benefits for using your credit card, in addition to racking up rewards and building your credit, for spending money you normally would anyway. Using a credit card is safer, more convenient, comes with a few extra perks and makes your trip a little bit easier.