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The summer months are the perfect time to visit another country. Keep reading to learn what not to do with your money while you’re there. [[{“value”:”
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If your plans this summer involve going to another country, you’ll want to start planning ASAP. Prices are only going up from here. By booking now, you can get a better deal and make reservations for any popular activities you want to do.
While you’re getting travel ready, it’s also a good idea to get financially ready. There are a few common money mistakes that people make when they travel abroad. By preparing ahead of time, you can make sure you avoid them.
1. Going into debt to pay for it
Travel can be an amazing experience, but you shouldn’t be borrowing money to do it. It’s a want, not a need.
It’s tempting to pay for what you can and put the rest on your credit card. Lots of people do this. They save enough for flights and hotels, but then rely on credit cards for all their spending on vacation (which always turns out to be much more than they expected). And there are also those who just pay for the entire vacation — flights, hotels, and all — using a credit card or loan.
You still eventually need to pay the bill, and it’s going to cost even more with the interest charges. And it’s an especially bad time to have credit card debt. The average interest rate on interest-bearing cards is nearly 23%!
Instead of going into debt, come up with a realistic budget for your trip. Then, start saving money for your travel fund in a high-yield savings account.
2. Using a card with foreign transaction fees
Credit cards are usually the most convenient way to pay for purchases. They’re also the safest when you’re abroad. Since your debit card is connected to your bank account, it’s better not to carry that around with you every day.
With any card you’re planning to use abroad, check if it has a foreign transaction fee. You can find this information on the pricing and terms that came with the card or on the card issuer’s website.
Some cards charge this fee on international transactions, with the most common amount being 3%. If you spend $2,000 on your trip, that’s another $60 in fees. It’s an extra cost you don’t need, because it’s easily avoidable.
If you don’t have one already, open a credit card with no foreign transaction fee. There are plenty of options available. If you plan to travel often, one of the many travel credit cards is probably a smart choice.
3. Saying yes to currency conversion at stores or ATMs
When you’re abroad, some stores and ATMs may offer dynamic currency conversion. This is a service that charges you in your home currency instead of the local currency. For example, if you’re withdrawing money at an ATM in Europe, it may ask if you’d like to pay in Euros or dollars.
Always decline currency conversion and pay in the local currency. Currency conversion includes a hefty markup, sometimes more than 10%.
There’s no advantage to accepting currency conversion. Sure, you’ll know exactly how much you’re going to pay in your home currency. But it’s a safe bet that will be much more than you would’ve paid if you declined this option.
4. Only bringing an American Express or Discover card
If you only carry American Express cards or Discover cards, that’s no problem in the United States. The days of U.S. businesses excluding those types of cards are largely over. They’re both now accepted at 99% of U.S. businesses that accept credit cards.
Internationally, it’s a different story. Acceptance is hit or miss. Businesses that accept credit cards just about always accept Visa and Mastercard, but American Express and Discover may not be an option. Make sure to have a Visa or Mastercard. Here are some of the best options:
Best Visa credit cardsBest Mastercard credit cards
It’s also a good idea to have cash in the local currency, just in case. The cheapest way to get cash isn’t at a currency exchange, but by withdrawing money using your debit card at a local ATM — just remember to decline the currency conversion, if it gives you that option.
All these money mistakes are easy to avoid once you know about them. Keep them in mind and you won’t pay any unnecessary fees or get into debt on your summer vacation.
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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Mastercard and Visa. The Motley Fool recommends Discover Financial Services and recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
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