Using your credit card for international travel: Is it really a good idea?

A credit card is one of the most convenient ways to spend abroad, especially since many banks offer some extra benefits - like reward and loyalty points - when using them. However, credit card foreign transaction fees can also get quite high, and you might run into extra fees such as cash advance charges to get cash from an ATM, interest and penalties.

So - what are the real costs of using your credit card abroad? Are there any ways to pay less overall in fees? In this article we will cover all this and we’ll show you some cheaper and more convenient alternatives to using your credit card abroad, such as the Wise travel card or Koho card.

Can I use my credit card internationally?

Yes. Pretty much all Canadian credit cards can be used overseas, but there are a couple of important provisions. Firstly you might need to let your bank know you’re traveling to avoid the risk of them blocking the card to stop fraud. And secondly, how easy it is to spend on your credit card abroad may also depend on the network it’s issued on.

Generally, Visa and Mastercard networks are the most broadly accepted globally, with merchants and ATMs in most countries being happy to let you spend and withdraw. American Express is slightly less popular in some countries compared to Canada and the US. While it’s often accepted in busy cities and tourist resorts, you’ll still come across some merchants and ATMs where you can’t use a card issued on this, and some other, networks.

How can I use my credit card abroad?

Generally you can use your credit card abroad in the same way as you would in Canada. You can tap and pay in stores, and use your card with a mobile wallet like Apple Pay if it’s eligible. You can also use your credit card to make cash withdrawals where your network is supported at an ATM - although fees can be particularly high for this.

Here are a few pointers on things to consider before you use your card abroad: 

• Check how popular your specific card’s network is, in your destination. Visa, Mastercard and Amex all have country by country information available on their websites - your bank can also advise you if needed

• Inform the bank of your travel dates to avoid having your card blocked during your stay abroad, and make sure your contact details are up to date on your card account in case the bank need to get in touch during your vacation

• Check the rates and fees applied by your bank or financial institution when using the credit card abroad, as well as the spending and ATM limits set for it. You might be able to increase the spend limit if you need to, online or in your card app

• Always pay in the local currency wherever you are, to avoid bad exchange rates and extra fees set by the merchant or ATM operator

For many travelers, travel cards from non-bank providers like Wise and Koho can be a better alternative than using a credit card overseas. We’ll look at these cards, and why they’re a good bet for overseas use, next.

Disadvantages of using a credit card abroad

• Foreign transaction fees - Many credit cards charge foreign transaction fees, typically 2.5% of each purchase, which can add up quickly.

• High ATM costs - Using your credit card for international cash withdrawals at ATMs can incur high fees and interest charges.

• You may need to tell your bank - You may need to inform your bank about your travel plans to avoid having your card flagged for suspicious activity.

• Interest and penalties can apply - Interest charges can accumulate if you don’t pay off your balance promptly, increasing your debt.

Advantages of using a credit card abroad 

• Convenient and safe - Credit cards provide a secure and hassle-free way to make payments without carrying large amounts of cash.

• Cards are broadly accepted - Most credit cards are widely accepted globally, making them a reliable payment option when traveling in many countries.

• Rewards and perks - Many credit cards offer rewards, cash back, or points on international purchases and travel, adding extra value to your spending.

• No need to carry a lot of cash - Using a credit card reduces the need to carry large amounts of cash, lowering the risk of loss or theft.

Alternatives to using your credit card abroad

Spending with a card when you travel is secure and convenient. But using your credit card isn’t your only option. You might prefer an alternative, which could offer flexible spending and withdrawals with lower overall fees and better exchange rates.

Some alternatives worth considering include prepaid cards, debit cards, and specialist travel cards linked to multi-currency accounts. Many of these are optimized for international travel which can mean lower fees, and issued on popular networks which are accepted all over the world.

Let’s take a closer look at two good choices you might want to consider.

Wise debit card (40+ currencies, 150+ countries)

You can open a Wise account online or on your phone and order a Wise card for a one time fee. Accounts support 40+ currencies for holding and exchange, but you can use your card even more broadly - in over 150 countries - to spend and withdraw. Add some money to your Wise account in dollars and you can choose to switch over to the currency needed in your destination, or leave in CAD and let the card do the conversion when you pay. In either case you get the mid-market rate and low fees from 0.33%.

Wise also offers a couple of free ATM withdrawals, to the value of 350 CAD, every month, before any cost begins.

• Hold and exchange 40+ currencies, spend in 150+ countries

• No ongoing or annual fees to pay

• Currency exchange uses the mid-market rate and low conversion fees from 0.33%

Learn more: Wise card review & How to use Wise card abroad for travel

Koho reloadable prepaid reloadable Mastercard (only in CAD) 

Technically, Koho cards are not credit cards. They also only support a holding balance in CAD and there are no options for holding foreign currency balances with any account plan. That means that every time you spend or make a withdrawal in a foreign currency, an exchange rate is used to convert the spending back to CAD.

However, a Koho card has the similar convenience and accessibility that comes with credit cards, just with fewer fees and no repayable accrued interest. Perks include 1% cashback on purchases and 5% interest on money in your account.

The Koho card is on the Mastercard network, meaning that it’s accepted around the world and eliminates foreign transaction fees if you choose the Extra or Everything account plan, which have monthly fees. This also includes one international ATM withdrawal per month, making it a convenient option that can help save you on fees when traveling.

• Choose from 3 account options for 0 CAD or for 9 CAD and 19 CAD for more features

• 1.5% foreign transaction fee on the no-monthly fee Essential plan

• No foreign transaction fees on the Extra and Everything plan

• One fee-free international ATM withdrawal per month on the Extra and Everything plan

• Accepted worldwide on the Mastercard network

• 1% cashback on groceries, food, drink and transportation

• 5% interest on your entire balance

Fees for using your credit card abroad

Some major Canadian banks offer travel optimized credit cards, which can have specific benefits for overseas use, such as no foreign transaction fee. Other cards typically have a foreign transaction fee of about 2.5% which applies whenever you spend in a foreign currency. Bear in mind though, that even if you pick a travel credit card, there will be some fees you need to know about. These can include high costs when you use an ATM, interest and penalty charges if you don’t pay off your bill in full every month.

Here’s an overview of a couple of travel credit cards against travel debit cards from Wise and Koho:

*Date correct at time of research - 16th July 2024

Here we selected specific travel credit cards which don’t have foreign transaction fees - but you still need to look carefully at the other fees that apply like annual charges, and ATM fees. ATM fees can be particularly steep at around 5%, with interest which might be at a higher rate compared to purchases.

If you’re looking to keep down the costs of your trip overall, you might find that travel debit cards from providers like Wise and Koho can offer better alternatives for international travel, with low fees and great exchange rates.

What is the exchange rate used on my international credit card?

When you spend or make withdrawals with your credit card overseas, the spending is converted back to dollars to be added to your bill. Generally you’ll find your bank credit card will use the network exchange rate, and then may also add a foreign transaction fee when calculating what you owe in dollars.

Here’s a quick look at how the banks we touched on above set exchange rates compared to the non-bank debit card providers we also featured:

• American Express exchange rate: Card spending uses the network exchange rate which may include a small markup. If a foreign transaction fee applies this is likely to be 2.5%

• Scotiabank exchange rate: Card spending uses the network exchange rate which may include a small markup. If a foreign transaction fee applies, this is likely to be 2.5% of the converted amount.

• Wise exchange rate: Mid-market rate with conversion from 0.33%

• Koho exchange rate: Mastercard network rate. A foreign transaction fee of 1.5% applies on the Essential plan

How to use your credit card for cash withdrawals overseas

Credit cards can be used abroad to make withdrawals at any ATM that’s connected to your card’s network. You can look out for the card network logo on the ATM terminal, or do a bit of research in advance, looking at the Visa (Plus network) or Mastercard (Maestro and Cirrus) websites.

The fees you’ll need to know about for ATM use can include:

• Fees charged by the bank: Such as a foreign transaction fee or a cash advance fee - shown in your account terms and conditions

• Fees charged by the ATM: Extra costs which are paid to the ATM provider - these usually flash on screen before you confirm your withdrawal

As with all credit card spending, the amount you spend or withdraw, plus any fees, will be added to your bill every month. Your foreign currency spending is converted to CAD before your bill is produced, using the applicable exchange rate and including any extra costs you have to pay.

When you use a debit or travel card, the fees can work differently. You’ll still need to watch out for ATM operator fees but you may get some withdrawals which have no provider fee. Here’s a look a Wise and Koho for ATM use:

• Wise card ATM withdrawals:  2 free withdrawals to 350 CAD/month, then a  1.5 CAD + 1.75% fee applies

• Koho card ATM withdrawals: One fee-free international ATM withdrawal per month on the Extra and Everything plan.

How to use your credit card for spending abroad

Once your card is set up for overseas use you can use it as conveniently abroad as you do at home. You might need to specifically tell the bank to convert your card for overseas use, or let them know where you plan to visit to avoid your card being blocked for fraud. Any overseas purchases are added to your monthly bill to be repaid, including any fees or exchange rate fees you have to cover.

Travel card providers like Wise may be cheaper for your overseas spending, offering the mid-market exchange rate with low conversion fees. It’s free to spend if you have enough balance in the currency you need - or you can let the card convert when you pay with the mid-market rate and low conversion fees.

• Spending with Wise card: Free to spend when you have enough balance in the required currency - or the card can automatically convert your balance from the currency in your account which attracts lowest fees

• Spending with Koho card: The Koho card is accepted in over 200 countries, making it easy to spend your prepaid balance globally. Extra and Everything account holders can enjoy no foreign transaction fees. However, card holders can only spend in CAD, and the mastercard exchange rate is applied, plus the 1.5% foreign transaction fee if you are on the Essential plan.

When is it better to use your credit card abroad?

There are a couple of scenarios where your credit card might be better than using a debit or prepaid card:

Car rental: It’s common for vehicle rental places to ask for a credit card as a payment guarantee. If you don’t have this, they might ask you to hand over a significant amount of cash as a guarantee against damage to the car

Check in at hotels: Hotels often ask for a credit card they can charge for extras or damage to the room, in case you check out without paying in full. If you don’t have a credit card they may ask for cash or put a hold on your debit card instead

Self-service gas stations: Debit cards might not be accepted at all here, or you might find there’s a hold of a fixed amount put on your card, with any unused balance refunded at some point after the transaction completes

How to avoid foreign transaction fees of credit cards

• Look for a specific travel credit card which offers no foreign transaction fee on overseas spending

• Avoid using your credit card in an ATM abroad, where cash advance fees, interest - and possibly also foreign transaction fees - will apply

• Get a different type of card, such as a travel optimized debit card from a specialist provider, to avoid foreign transaction fees and access great exchange rates

Learn more: Best travel cards without foreign transaction fees

Tips for spending with your credit card abroad

• Avoid dynamic currency conversion (DCC): DCC is where you’re asked if you’d prefer to pay in your home currency instead of the local currency where you are. Say no, to avoid extra fees and a bad exchange rate

• Understand your credit card’s foreign transaction fees: Where foreign transaction fees apply then can add about 2.5% on to everything you spend - in addition to any other charges like interest or cash advance fees

• Check out the perks that your card might offer: If your card has travel focused benefits use them as extensively as possible. You might be able to get discounts on hotels, lounge access, or extra rewards for international spending for example

• See how widely accepted your card network is in your destination: AmEx isn’t the most common network in many countries, so do check ahead to know if your card will be easy to use

• Have some form of backup funds: Don’t get stuck with no money and no means of payment - have a little cash, an extra travel money card or two, and your Canadian debit card, just in case

Conclusion: Is it a good idea to use a credit card abroad?

Spending with a card is convenient and secure. However, using a credit card abroad may attract more fees compared to using it at home. It’s crucial to check out the likely costs before you travel, so you’re not caught out. You’ll also want to check the network availability, and whether you need to instruct your bank you’re away from home, so you don’t get locked out of your account on your precious vacation.

Consider popping a travel money card into your wallet alongside your credit card. This can be a useful backup, and is usually cheaper when you need to use an ATM, too:

• Wise: Hold and exchange 40+ currencies, spend in 150+ countries, and get the mid-market rate with no foreign transaction fee to pay

• Koho: Spend in CAD in over 200 countries on the Mastercard network and enjoy no foreign transaction fees and one fee-free international ATM withdrawal per month on the Extra and Everything plan.

Using a credit card abroad FAQs

What happens if I use my credit card in a foreign country?

When you use your credit card in a foreign country, the transaction will be converted to your home currency at the current exchange rate, and you may incur foreign transaction and ATM fees.

Is it better to use a credit card or debit card abroad?

Using a credit card abroad can be the better option due to potential travel rewards and benefits, depending on the card. However, they tend to come with foreign transaction fees, which can add up. Travel debit cards like Wise can be a better alternative, supporting multiple currencies and offering no foreign transactions as well as some fee-free ATM withdrawals.

Will I get charged for using my credit card abroad?

You might get charged foreign transaction fees when using your credit card abroad, which is typically 2.5% of the purchase amount, unless your credit card offers no foreign transaction fees.

Can I use my AmEx card internationally?

American Express cards can be used for spending and withdrawals overseas. Bear in mind that in some countries, AmEx isn’t always supported so you’ll need to keep an eye out for the logo at ATMs and payment terminals.