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  • Should You Use Cash or Card While Travelling Abroad?

    Often, when we travel abroad, we face this conundrum of taking a decision on whether to use credit cards or cash for shopping and other purchases. However, there is no definite answer to this question. You have to be smart enough to make the most of your credit cards when you are abroad by ensuring that you earn as much air miles, rewards points or cash rebates as possible. At the same time, you must also make sure that the foreign transaction fees applicable do not cancel out the benefits that you are trying to get. Before you take your flight to a foreign country, you must find out the areas in which it is better to use cards and where you should avoid using them. There will be instances when you will have no other option but to use cash, so you cannot abandon cash altogether. You must carry your passport every time you make a foreign currency transaction as many merchants will ask for your identification before they accept your card. Read on, to find out ways to make the most of your fancy credit card when you are abroad.

    Fees That You Will Have to Pay When You Are Abroad

    You will largely have to pay the following fees when you use your card abroad. However, these fees vary from one card to another:

    • Currency Exchange Fee

    This fee varies based on the bank. The exchange rates are applicable whenever you make a foreign currency transaction. The foreign exchange fee is charged after the conversion from Singapore dollars to the local currency.

    • Distributor Fee (MasterCard/Visa)

    The distributor fee remains the same irrespective of the card issuer. Both Visa and Mastercard charge a nominal fee when you make purchases abroad and convert the currency.

    • Cross-border Transaction Fee

    The cross-border transaction fee is made up of two parts. One part of the fee is charged by the card issuing company while the other part is what the credit card network charges. The fee that issuers charge often depend on your credit card. This fee is normally between 1% and 2% of the transaction amount.

    To get more clarity about these fees, it would be best to talk to your bank as the waivers on foreign exchange fees will be unique to your specific card.

    Consider the Dynamic Currency Conversion Fee

    When you are abroad, always choose to pay using the overseas currency. If you pay using Singapore dollars when you are abroad, you will be charged an additional fee known as the Dynamic Currency Conversion Fee. By choosing to pay in Singapore dollars, you will not only pay more, but you may also lose the cashback and rebates that you are eligible for when you make a foreign currency transaction.

    Why it’s Beneficial to Use Credit Cards When You Are Abroad

    Even if you are charged more for using your credit card, it may still be beneficial to use a card when you are abroad because of the following reasons:

    • It offers you convenience and security

    When you are in an unfamiliar territory, it is always better to use cards instead of cash as even if you lose your card, your money will remain safe (provided you inform the bank in time) unlike cash that you cannot regain once it is gone.

    • Perks offered by numerous credit cards

    Most cards, especially the one that you may have used to book your flight tickets will also offer perks when you use the card abroad. These perks are often in the form of additional cash rebates, cashback and air miles, among other privileges.

    Should I Still Be Using My Card While Abroad?

    Even if you choose to use only cash while you are abroad, you cannot escape all foreign currency exchange fees. So, before you make a decision on whether to use your credit card or cash while you are abroad, take a look at the following example:Say you spend S$2,000 while you are abroad and you earn 4,000 miles. Even if you are being charged 3% foreign currency transaction fee, you will get 4,000 miles for just S$60. Taking this rate into consideration, you would pay S$600 for 40,000 miles. This number is enough for you to get 2 return tickets on Singapore Airlines to surrounding countries like Indonesia. Now, if you choose to use S$2,000 in cash, you will not get any air miles.

    However, you cannot take the above example as the benchmark for all credit cards, because the terms and conditions applied will be different for different cards and you should be making this decision based on the type of card you own. Also, with the best cash exchange programme, you run the risk of getting too much cash in a foreign currency and by the end of your trip you will have to pay even more to convert all the foreign currency back to Singapore dollars.

    So, there is no straightforward answer to the question above. Both cards and cash have their own sets of advantages and disadvantages. Both modes of payment are feasible in different situations. In conclusion, a trip out of the country should not be filled with uncertainties over foreign currency conversion rates and how to manage foreign money. So make a decision on the right spending tool before you leave by doing a bit of research about the place you’re going to, the spending habits there, the type of payments that are accepted, participating merchants, and rewards on cards.

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