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How to maximize rewards on an international trip

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Traveling abroad can be thrilling, riveting… and expensive. Whether it’s airfare and lodging or all the spending you do on the ground, costs can add up quickly. With the right credit card, you can actually benefit from these purchases. You can meet spending requirements and maximize rewards by charging everything to your card. Credit cards are convenient and can offer added protection that can come in handy if you fall victim to a tourist scam.

Despite the many positives, you may have some reservations about using your credit card internationally. After all, credit cards aren’t accepted in every city in the world and some merchants will add fees for card transactions or offer discounts when you pay cash. The incentives for not using credit cards can be pretty compelling.

But you shouldn’t let these concerns get in the way of maximizing rewards on your next international trip. Here are some obstacles that might get in the way of maximizing rewards on your next trip abroad, and how to navigate them:

Foreign transaction fees

Credit card companies charge foreign transaction fees on purchases processed outside of the U.S.—usually around 3 percent. That may not sound like much, but an extra $30 in fees for every $1,000 spent can put a dent in your travel budget. Foreign transaction fees can actually negate the value of any rewards you earn on travel expenses, especially if you use your card on big-ticket expenses like hotels and rental cars.

But this is easily solved by using a credit card with no foreign transaction fees. Most travel rewards cards waive these fees now, so you can use your card abroad without this added expense.

However, a few cash back cards—like the Chase Freedom Unlimited® credit card and Chase Freedom Flex℠—still charge foreign transaction fees. And many consumers don’t realize that. If you’re planning to pack these cards for your next trip abroad, you should definitely consider other options.

The Chase Sapphire Preferred® Card is a solid alternative, as is the Capital One Venture Rewards Credit Card. Both cards carry reasonably $95 annual fees and offer generous category bonuses on travel spending.

Lower prices (or added fees) when paying cash

In some countries, merchants will impose their own fee on credit card transactions, usually 3 percent to 5 percent. Merchants at other destinations may offer discounts on cash transactions. In both scenarios, you should weigh the savings against the value of rewards you’re giving up.

Points and miles are worth 0.5-2 cents per point, depending on the currency and how you redeem it. Most hotel points are valued under one cent each, while transferable points like Amex Membership Rewards and Citi ThankYou points go as high as two cents.

When you’re faced with a credit card processing fee, compare it against the rewards you’re earning to decide whether paying the fee makes sense.

You’ll also give up purchase protections by paying with cash, which can be invaluable if you fall victim to a scam. Tourists are often targeted and the cons aren’t always obvious. That leather jacket you thought you were getting a deal on might not be authentic. The ancient coin you bought could be a dressed-up Chucky Cheese token. Credit card purchase protection can help you recover funds in these situations.

Think about what might be at stake and decide whether the cash discount is worth the forfeiture of points and purchase protection offered by your credit card company.

Lack of universal acceptance

If you’re traveling off the beaten path, credit cards may not be as widely accepted as they are in the U.S. You may find yourself in this scenario and decide cash is preferable. It certainly makes sense to travel with a bit of cash, just in case.

If credit cards aren’t accepted where you’re traveling, there’s not much you can do about it. But you can do your part to increase the odds that if cards are accepted, your issuer is among them.

Generally, Visa and MasterCard are the most widely accepted credit cards worldwide. So if you’re traveling internationally and your main cards are from American Express and Discover, you might want to bring a backup Visa or Mastercard, just in case.

That’s not to say that you shouldn’t bring a Discover or American Express card with you on international trips. They’re common in many parts of the world. But since they fall behind Visa and Mastercard, it makes sense to have a backup.

Chip & PIN card

Chip & PIN cards are programmed with a PIN you can enter during checkout. This technology provides added security and cuts down on fraud, since scammers can’t use a card without the associated PIN. Not having a Chip & PIN card might cost you rewards on your next international trip, especially if you’re traveling to Europe.

Chip & PIN cards were standard in Europe long before they were adopted in the U.S. Nowadays, most U.S. credit cards have chips but prompt a signature at checkout instead of a PIN number. Some of these cards have PIN capabilities, though not all consumers set one up. This can be problematic if you use your credit card abroad, since you might need to enter a PIN at checkout if the terminal doesn’t allow a signature.

While many terminals can detect that a card doesn’t have an associated PIN and should be processed with a signature, there are exceptions. I’ve had countless transactions declined in Turkey because the card reader prompted a PIN and wouldn’t process the payment without one. This issue occurred randomly and created a minor inconvenience.

If you want to avoid being mistaken for a fake German heiress trying to skip out on a bill because your cards aren’t functioning, set up your credit card PIN before your next trip abroad.

Poor exchange rates

The last thing you want is to trade convenience and rewards for a poor exchange rate on your purchases. Luckily, you can avoid this problem by paying for your credit card purchases in local currency. That way, you won’t incur additional fees when your card issuer converts the transaction to U.S. dollars. You’re much more likely to get a favorable exchange rate by paying in local currency.

Most of the time, merchants will ask you if you want to pay in local currency or U.S. dollars. But some will skip this step to avoid confusing their customers. If a merchant doesn’t give you a choice, it’s worth requesting that they process the transaction in local currency.

Merchant codes that limit category bonuses

If you’re using your credit card for purchases abroad, you’re probably looking to maximize your point earnings. Many credit cards offer bonus points on travel, with some as high as 5 points per dollar spent. Unfortunately, purchases that would earn you bonus points at home may not code the same abroad.

There are a few workarounds. The easiest option would be to use a card that earns more than 1 point per dollar spent on all purchases. The Capital One Venture Rewards Credit Card and Capital One Venture X Rewards Credit Card fit this criterion. Both cards offer 2X points on all spending and no foreign transaction fees. They’re ideal for folks who want to earn elevated rewards without the hassle of trying to maximize rewards. This can work out well when you’re on vacation and don’t want to obsess about which card to use for different purchases.

If you’re one of those people who can’t stop thinking about maximizing every dollar spent, you can look up merchant codes ahead of time to determine how your bank codes them. This can be lucrative if you’re paying a significant amount for a boutique hotel or tour operator and are unsure whether it will be coded as a travel purchase. If your Amex card doesn’t code the purchase as travel, but your Visa does, you know which card to use.

The bottom line

Cash may be king, but credit cards can provide an added layer of security when you’re traveling abroad. Between extra protections and rewards, using a credit card abroad is a great way to maximize your spending and earn rewards for future travel.

Written by
Ariana Arghandewal
Travel rewards writer
Ariana Arghandewal is a personal finance expert specializing in credit cards and travel rewards. She is passionate about helping people leverage credit card rewards to realize their travel goals.
Edited by
Senior Editor
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