Do I need a credit card for overseas travel?

Now more than ever, you’re less likely to need a credit card to travel overseas but there are advantages to using one as your primary method of payment when journeying abroad.

Credit cards are handy for everyday transactions, paying bills, buying big ticket items and accruing rewards points on purchases. The latest payments data compiled by the Reserve Bank of Australia (RBA) revealed that Aussies made more than 293 million credit card transactions in January 2023, totalling over $33 billion in value.

Of the almost 300 million transactions in the first month of the year, 11 million (3.3%) were overseas credit card purchases. These transactions amounted to almost $2 billion in value.

Given these statistics, it’s obvious that many Australians utilise their credit cards when travelling internationally. Australian credit cards are widely accepted in most countries, particularly those cards affiliated with Visa, MasterCard and American Express.

These three popular payments networks are globally recognised, allowing cardholders to make payments almost anywhere in the world. Previously, these payment networks were exclusive to credit cards but nowadays many debit cards and travel money cards are connected, meaning you can spend your own funds abroad, no credit required.

Is it better to use a credit card than debit or cash?

As it’s possible to transact in the same way with a credit card as it is with a debit card overseas, the decision will generally depend on your financial preference and spending requirements.

There are a range of credit cards that offer advantageous extras such as rewards points and programs for spending, travel insurance, airport lounge access and complimentary hotel concierge services.

There are a number of fee-free credit cards available. Each card can incur different charges so it’s worthwhile comparing your options to decide which suits you best for your trip.

Some cards may not allow you to load a particular currency, while others will have costlier cross-currency conversion fees. For example, some credit and debit cards that offer 0% fees for overseas purchases may charge a higher exchange rate. This isn’t necessarily a negative as this premium rate is still generally better than those offered by most travel money cards.

If you have enough money saved to cover the costs of your trip, using a debit card that’s accepted internationally will enable you to spend within your means. You won’t have to worry about coming home to an enormous credit card bill, as you’ll have only used funds that you had available in your transaction account.

There won’t be any chance of interest charges on your expenditure as you won’t accrue any credit card debt.

However, some debit cards have lower daily spending limits than credit cards. If you’re making considerable purchases - such as splurging on multiple night stays at luxury accommodations, costly travel experiences, extravagant shopping binges - it may be more feasible to use a credit card.

Some banks and financial institutions allow debit card customers to increase their daily spending limits on overseas purchases, so if you need access to more of your funds it may be worthwhile contacting your financial institution or checking to see if you can adjust these settings via your online banking portal or mobile app.

You may find that, for security reasons, some overseas hotels, restaurants, car rentals and tour operators only accept credit cards and not debit cards when requesting a deposit or hold on a booking. It may be sensible to check what’s required before travelling to avoid any complications.

You can also pay cash for purchases you make when travelling overseas, however, many countries now accept, and even prefer, digital payments. Additionally, using cash means you’ll have to make withdrawals at ATMs and risk your money being stolen or lost. It’s often a lot more difficult to recover cash than claim misused or fraudulent digital transactions.

If you’re travelling to different countries on your journey you’ll have to visit currency exchange outlets to convert your money and be subject to potentially exorbitant fees and rates.

Check your travel insurance policy to see what coverage options are available with regards to cash losses and theft. It may be more beneficial to use a combination of credit, debit, travel money cards and cash on your next holiday.

Things to consider when using a credit card overseas

There are a number of factors to take into account if you’re using a credit, debit or travel card when heading abroad. These include, but are not limited to:

• Check your daily spending limits and make adjustments before travelling
• Inform your bank that you’ll be using your card overseas to avoid card blocks
• Consider making a travel budget so you don’t overspend
• Use your banking app or a third-party budgeting tool to track and control your overseas spending. You can set daily spend limits, calculate costs, record expenditure and more
• Enquire about extra fees or costs associated with overseas card use (e.g. ATM fees, currency exchange costs, cash advance charges, international transaction surcharges)
• Review your finances and spending when you return for errors and inconsistencies.

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