If you’re old enough to remember using travelers checks on vacation, you’ve probably written a check at the grocery store.
Both can seem old-fashioned. Both can still be used today, with travelers checks getting an electronic update that can make them work like a debit card but with more options. The physical travelers checks still exist also.
Credit and debit cards, and even good old travelers checks can be used to pay for things when traveling abroad instead of relying on cash and the having to worry about carrying a lot of cash on you. With some advance planning, travelers can make using money overseas easy and avoid paying ATM, bank and other fees that they might normally not have to pay when traveling in the U.S.
Best uses for travelers checks
While a travelers check may not be foremost in your money plans when overseas, it might be the safest option.
These physical checks can only be cashed if you sign the back with the same signature you used when you got the checks. If the checks are stolen or lost they can be replaced quickly. A lost or stolen credit or debit card, however, could be used by someone else before it’s reported to your bank, and you’d have a hard time getting your money back through unauthorized debit card withdrawals.
If you’re going to a country without many ATMs, travelers checks will still be accepted at most banks. The downside is that few businesses accept travelers checks, so you’ll have to find a local bank or foreign currency exchange to cash them and get local currency. That can take some time, but can be your best option if ATMs are rare.
Along with the physical travelers checks from American Express, there are also debit card equivalents of travelers checks offered by Visa, Travelex and MasterCard.
The “Cash Passport” from Travelex that’s used like a MasterCard is a chip-and-pin enabled card that can hold six types of currency and it isn’t connected to your personal banking information. You add money to the card electronically, such as an amount each morning that you’ll need that day, limiting the loss if a thief gets the card and your PIN code.
Using credit cards abroad
If you’re traveling to a major international destination, chances are your credit card will be accepted at most businesses. Out in the countryside, however, you might need cash.
Start your credit card plans overseas by bringing a Visa or MasterCard — the most widely accepted credit cards. American Express is accepted around the world also, but by fewer merchants. If your main card is American Express, bring a Visa or MasterCard backup. Whatever card you use, have a backup in case your primary card is declined.
Check with your credit card company to make sure that it doesn’t charge foreign transaction fees, which are typically 3 percent outside the U.S. If your card does charge this fee, you should be able to find another card that doesn’t charge it.
Merchants at your destination may charge a fee for using a credit card, though that’s unlikely. The credit card’s exchange rate may change daily, so don’t expect to see the same amount paid for the same tab on different days.
Along with no foreign transaction fees, your credit card offers more protections than any other form of payment — except maybe a travelers check — for fraud if your card is lost or stolen and you immediately report it. It my also offer protections for lost luggage, delayed flights, trip cancellation and accident insurance.
To avoid having your credit card frozen for suspicious activity on a trip, make sure to tell your provider the dates you’re traveling and where. This is also a good practice when traveling in the U.S.
Some foreign businesses may offer you the option of using U.S. dollars instead of the local currency when using your credit card. Don’t do it. Seeing your total cost in dollars may be enticing, but it can be costly.
The exchange rates for this type of payment, called a dynamic currency conversion, are usually much higher than what your credit card issuer provides when it converts the purchase for your statement.
Getting the local currency in your hands can be one of the most frustrating monetary experiences of your vacation, but there are ways to make it easier. Some places don’t take credit cards, and cash may be your only option at some small businesses.
First, check with your bank at home before your trip to see if it has ATMs at your destination or has a reciprocal agreement with a foreign bank to use its ATMs. Bank of America, for example, had a no-fee agreement with BNP Paribas last summer when I used its ATMs in France.
However, the banking partner agreement that my bank had wasn’t as reciprocal as I thought it would be. I wasn’t charged a fee by my bank to use BNP in France, but BNP charged me a 3 percent transaction fee to use its ATMs in France. In Belgium, the fee was 8 percent. I was also charged a $5 fee by my bank for using a BNP ATM outside of France.
Debit cards can also be used at businesses to get cash back from a purchase. I did this a few times at a grocery store in the Netherlands, but was charged a $5 fee by the grocer and paid a higher exchange rate than I would have with a credit card.
Before leaving home, try to get some foreign currency from your bank or at a reasonably-priced exchange business so that you’ll have some of the local money in your hand when you arrive.
You’ll then at least be able to buy a cup of coffee or subway ticket without having to pull out a credit card. And if you’re lucky, it may help you avoid looking like a tourist for a few minutes.