Overseas travel can be expensive, especially when your credit or debit card gets blocked or you incur an additional charge when transacting abroad. So how should you protect yourself? Image Credit: Shutterstock

Dubai: Ugh, been there, done that: Blissful beach vacation interrupted by a ‘card declined’ nightmare! Or maybe you ended up paying triple digits for a simple airport latte thanks to sneaky fees. Believe it or not, these travel money traps are more common than you think.

But fear not, financially savvy travelers! Arm yourself with knowledge and avoid these common pitfalls

“Overseas travel can be expensive, especially when your credit or debit card gets blocked or you incur an additional charge when transacting abroad,” said Essam Kabeelali, an Abu Dhabi-based credit advisor.

“The biggest and the most obvious reason for both instances may be that your card does not support international transactions. Not all cards support international transactions. You need to check from your bank or card issuing authority if your card supports international transactions.”

Kabeelali went on to detail how large purchases, charges from sellers in foreign countries, or activity that seems unusual may trigger the bank or credit union to lock down your account to avoid fraud. “This is why you should always contact your bank to let them know you'll be out of town,” he added.

Why do cards get declined or blocked when travelling overseas?
International transactions and purchases in foreign currency are the most common causes of declined card transactions. “Most of the time, international transactions are declined or cards blocked for your benefit,” explained Rajesh Markara, another Abu Dhabi-based debt advisor.

“For the card issuer or bank, a sudden international transaction may seem suspicious. For you, a declined international transaction can mean unnecessary hassle and concern. But such rejections can be avoided with a few simple corrective measures and by keeping a few things in mind.

“Overseas transactions using cards may be declined for not informing the bank or card, or when a series of domestic transactions are followed by an international transaction. So if you always spend in your domestic currency, the card may block the transaction as a precaution.”

What type of overseas charges do you get on your cards?

When travelling abroad, credit or debit card fees can seem to get more complex when piled on by two or more additional one-off charges, namely ‘currency conversion’ and ‘foreign transaction’ fees.

“While a foreign transaction fee is imposed by a credit card issuer on a transaction that takes place overseas or with a foreign merchant, a currency conversion fee is imposed by credit card payment processor on the same transaction to convert from one currency to another,” explained Kabeelali.

When you make a purchase with your resident-country issued credit or debit card in a foreign country, be it in-store or online with a company based in a foreign country, the card issuer, usually a bank, may charge a foreign transaction fee of 2 to 3 per cent of the purchase price.

This can be incurred even if you withdraw cash from an ATM abroad. Whether you pay the fees depends on the card or ATM network you use, as not all cards charge a per transaction fee on purchases or withdrawals made overseas or when ordering online with a foreign merchant.

How foreign transaction fees are calculated: Here are two examples
Let’s say you travel to Singapore, spend the equivalent of Dh1,000 in a department store, and charge the purchase to your credit card or pay for it with your debit card. With a 3 per cent foreign transaction fee, when you receive your statement online, you will notice a surcharge.

Alternatively, suppose you run out of cash and decide to use an ATM that charges a 3 per cent transaction fee to obtain Dh1,000 equivalent in euros. The actual cost to you will be higher than Dh1,000 worth of euros, depending on your card-specific policy.

At times the foreign transaction fee is also called a foreign exchange fee. Often the foreign transaction fee you pay includes the currency conversion fee. For example, your total fee might be 3 per cent, with 1 per cent consisting of the currency conversion fee and 2 per cent accounting for the transaction fee.

Here’s another example: Imagine you pay 82 euros (Dh317) while on vacation in Spain, using a card on the MasterCard network that has a 2 per cent issuing bank fee. With the currency conversion, this works out to $100 (Dh367). Based on that amount, MasterCard will charge 1 per cent on top of each purchase.

Then, the issuer will charge another 2 per cent on top of that, equaling $103 or Dh378. This might not seem like much, but an extra 3 per cent on top of each of your individual vacation expenses can quickly add up.

Is there a way to avoid such foreign transaction fees?

Whether it’s a foreign transaction or currency conversion fee, it’s always better to pay no fee. “In order to avoid or minimise fees when traveling abroad, check your card’s fees under ‘terms and conditions’ and, if appropriate, apply for a ‘no fee’ card before you travel,” added Markara.

“Another tip is to get some cash before you leave home to minimise trips to an ATM. It's usually wise to have local cash on hand when traveling in a foreign country. Keep in mind you can still incur both international transaction fees and out-of-network ATM fees when withdrawing cash overseas.

“So make sure that you use an ATM card that reimburses ATM fees. While it is also important to check whether your bank is part of a ‘no fee’ or ‘low cost’ global ATM network first-hand, you should also try getting a debit card that does not charge foreign transaction fees,” advised Markara.

Nevertheless, it's still best to use your credit card whenever possible, as long as it has the benefit of no foreign transaction fees. You'll avoid paying extra and you'll also enjoy the protections offered by your card issuer.

In the end, a trip overseas shouldn’t be filled with worries over conversion rates and handling foreign money. “So get the right cards before leaving and allow your focus to shift to its rightful place: Having a good time, or getting down to business,” added Kabeelali.

“But as long as you have a credit card with no foreign transaction fees, notify your credit card company of your travel plans, and only pay for purchases expressed in terms of the local currency, you should be able to avoid post-trip credit card statement surprises.”

By being a smart globetrotter, you can avoid travel money traps and focus on what truly matters: Making memories (and maybe indulging in that dream latte at the actual price!)