Traveling abroad this summer? Don't make these three costly money mistakes
Author: Lyle Daly
Source: The Motley Fool
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 between 20 and 26 percent!
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.
This article was written by Lyle Daly from The Motley Fool and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.
