Many consumers may be thinking of traveling abroad this summer and planning on dealing with credit card debt to ease transactions overseas. However, there are a number of things to keep in mind before finalizing plans.
One thing many consumers may not consider when they travel overseas is that their credit card can cause a lot of problems if they try to use it, according to a report from Investopedia. One of the biggest reasons for this is that many countries in Asia, Africa, Europe and even Central America have begun switching to a new credit card system in the last several years.
The little magnetic strip located on the back of nearly all credit cards issued within the U.S. may work here and in Canada, but the technology is relatively ancient and largely unsecure, the report said. As a consequence, many foreign nations now use the more advanced system known as "chip and pin." With this, all data is stored on a readable microchip embedded within the card, rather than the familiar magnetic strip. Because of this swap, which took place several years ago in many popular European and Asian countries, it may be difficult to find a business that can accept American credit cards.
In addition, many credit cards issued in the U.S. carry fees for being used in other countries, the report said. These are charged because of the cost associated with transferring U.S. dollars to the foreign currency, and can run as high as 3 percent of a transaction's total value. For this reason, consumers may end up paying more than they planned for all the purchases they make in another country for an entire trip, making it harder to get out of debt.
However, American credit card issuers may be wising up to the new trend, the report said. Many are now issuing credit cards with both the microchip and magnetic strip technology, and some have started to waive foreign transaction fees on certain accounts. These changes typically only affect the wealthiest borrowers, though,
It may also be a good idea for consumers to let their lenders know they plan on traveling overseas, as a large number of transactions in a foreign country within a short amount of time may set off red flags that leads to the card getting canceled because the institution may believe the purchases are fraudulent.