Wouldn’t it be great if some of the money you spent traveling overseas would come back to you thanks to having the best credit card for travel abroad in your wallet? Did you know that the difference between a travel credit card and an ordinary credit card has to do with the features the card comes with?
Cue an absolute onslaught of information if you’re brave enough to Google either of these questions.
If you’re new to travel, you’re likely new to the travel credit card scene. It can be intimidating to enter. Even experienced travelers may put off learning about how to maximize the money spent on their adventures simply because the associated strategy and admin are not for the faint of heart.
Moreover, learning how to ascertain the best credit card for international use and living abroad takes time. After all, everyone’s situation is different. But, we all have to start somewhere, so why not here and now?
In this article, I’m breaking down the key differences between credit and debit cards and exploring a select few great travel credit card options. I also encourage you to approach these cards as financial tools that can both facilitate your travel and make you feel like the capable financial boss you are.
First things first. What is a travel credit card?
Travel credit cards are a common entry point to travel hacking – and with good reason. The sign-up bonus, rewards points, travel insurance, fraud protection, and other benefits associated with travel credit cards make these cards compelling travel investments.
The first thing to understand is how these cards work and why they’re an investment. Once you get a handle on that, it will likely become clearer whether this route makes sense for you at this time. While I am a firm believer in approaching travel as an integrated investment in both your personal and financial well-being, the reality is that these cards aren’t for everyone.
The bottom line here is that travel credit cards are a privilege. People who benefit the most from travel credit cards are those who a) can reliably pay off their entire statement at the end of every month, and b) have strong credit scores.
The difference between a debit card and a credit card when traveling abroad
Before we dig in more, let’s pause and establish the definitions of a debit card and a credit card. This is really important information because the two are not interchangeable. The consequences of using them like so can be severe and compound with time.
A debit card deducts funds directly from your checking account for purchases, limiting spending to what’s available. So, if you have $560 in your account, that’s exactly the amount you have to spend.
In contrast, a credit card extends a line of credit, allowing you to borrow money up to a predetermined limit. That predetermined limit is set by the credit card company and is called a credit line. If your credit line is $7000 per month, then, technically, you can spend up to that amount.
While debit cards offer spending control, credit cards provide flexibility. When used properly the latter can be a proactive means of making your money work more for you.
Personal note here
I’m really fortunate that my dad, who worked 40 hours a week for the US Postal Service, is also extremely passionate about financial literacy. For as long as I can remember, he has talked money with me. (Though, if I’m honest, I rolled my eyes and sidestepped most of those conversations until I became an adult.)
When I was in middle school, he gave me a Discover credit card and instructed me to use it once a month. Many pre-teens would have been excited by the limitless feeling that accompanies holding a piece of plastic with the equivalent spending power to many years of mother’s helping and babysitting. I was instinctively apprehensive and cautious of money I couldn’t see. In fact, I had to be nudged, cajoled, and chided into using it.
There are two funny things here. The first is that the card was linked to my dad’s account. So, my personal responsibility for the final statement was curtailed, but I worried about using the card as though I were the one responsible for paying the balance. The second is that I used the card for the occasional after-school trip to Wendy’s. So, we’re talking about little-old me stressing out over how my dad would pay for a medium Frosty and some fries. Good times.
It wasn’t until I moved abroad that I fully realized how strong of a foundation (and how important of a gift) he had given me
By doing things like talking openly with me about money and giving me opportunities to understand the practical applications of what he taught me (such as by providing me with a credit card and closely supervising me), he helped me understand money as something to be worked with and managed.
When I went to apply for my first-ever travel card (which is still the one I use today), it was my strong credit score that enabled me to qualify for it. That strong credit score only existed because of that first Discover card and the various coaching sessions he gave me.
When I moved overseas with the card, it was wholly thanks to my dad that I knew to never spend more than I could pay off at the end of the credit cycle.
The devil is always in the details
I want this article to be helpful to those trying to determine the best travel credit card for themselves. I also want it to open the door to other questions, such as the implications of using a credit card for travel, so that you can feel more confident that the questions you’re asking are the right ones.
In order to dig into that topic, though, we need to start with answers to basic questions, so that you can build your own strong foundation from which to launch your travels.
Is it better to use a debit or credit card abroad?
The choice between a debit and a credit card while traveling abroad hinges on two critical factors. The first is what your options are for the specific cards to take. The second is your financial stability, which determines the travel credit cards you’re eligible for. To turn up these finer details, I often rely on sites that offer comparisons of different cards, such as Nerdwallet.
How do travel credit cards work?
Travel credit cards allow you to earn points or miles on your everyday purchases, which can be redeemed for travel-related expenses like flights, hotels, and more. Here’s a breakdown of the categories travel credit cards can help you add value to your purchases.
Earning Points/Miles
When you spend money using a travel credit card, you earn points or miles. For example, you might earn two points for every dollar spent on dining or travel.
Redeeming Points/Miles
Once you’ve accumulated enough points or miles, you can redeem them for travel rewards. This could be a flight, hotel stay, or even an upgrade to business class. It’s important to note here that travel credit card rewards points and miles are like any normal currency in that you will need more of them to redeem higher-end rewards. What I’m trying to say here is that qualifying for a travel credit card does not mean you’re magically a business class flyer (unfortunately).
Bonus Offers
Many travel credit cards offer sign-up bonuses. This means that you can earn a large number of points after meeting a certain spending requirement within a certain timeframe. The timeframe is usually within 90 days of account opening.
Note: This is so, so embarrassing, but worth noting so that you don’t repeat my mistake. Back in 2018, I missed qualifying for the GENEROUS sign-up bonus Capital One Venture Rewards cardholders are entitled to when they hit the qualifying spend. This was back in 2018 when I was still incredibly wary of spending “invisible” money (which is how I think of my credit line), but it still haunts me to this day.
Truly, this was hundreds of dollars in free money left on the table. If you take nothing else away from this post (besides the importance of paying off your monthly statement), understand the importance of sketching out a strategic spending plan for your new travel credit card so that you can qualify for that sweet, sweet bonus.
Additional Perks
These cards often come with added benefits like free checked bags, priority boarding, or access to airport lounges. Note that value varies from card to card, and the benefits often vary only slightly. Be sure to read carefully.
Disadvantages of using a credit card abroad
Not all credit cards are created equally. When people talk about travel credit cards, they’re talking about a specific group of cards that have been developed with a type of user in mind – a traveler.
As a baseline, a travel credit card should not charge foreign transaction fees, but in general, it’s a fairly common practice for normal credit cards to do so.
Additionally, there are a few other considerations to bear in mind when using a credit card abroad.
Dynamic currency conversion
OK, what does this even mean?
Imagine that you’re in a little grocery store in Paris. You’re buying wine, cheese, saucisson, and a baguette for a picnic in front of the Eiffel Tower. You get to the end of the checkout line and pay with your travel credit card with zero foreign transaction fees. So far, so good. But then, a question from the machine. Do you want to pay in the local currency, which is Euros, or do you want to pay in USD?
Always, always choose the local currency.
If you select USD, then the conversion rate may be set by the merchant, and it’s often at an unfavorable (read: higher) rate than the one your travel credit card issuer will use.
Limited acceptance
Not all foreign merchants accept every card type. In my experience, this is especially true for American Express. Despite being an objectively excellent card in most scenarios, many places in Europe (in particular) do not accept American Express. (I witnessed this firsthand in Lisbon when my colleague’s card was turned down in virtually every restaurant, store, and shop we went to.)
As a general rule, Visa and MasterCard are much more widely accepted. It’s also not a bad idea to research destinations specifically to understand what credit cards are typically accepted there.
For example, I can attest to Visa working just fine throughout most of France, but I have no idea what the best foreign credit card practice looks like in, say, Thailand. (Hopefully one day, though!)
Unexpected blocks
Banks might flag foreign transactions as suspicious, resulting in your account being frozen and you unable to access your funds.
Fortunately, this is an issue you can anticipate by contacting your bank ahead of time to note that you will be using your card abroad.
Additionally, when you’re appraising potential travel credit cards, I would look for reviews that speak to the quality of the company’s customer service. If the card is purporting to be for travelers, then I would expect to see very positive reviews for situations such as:
- needing to get a hold of a person to resolve an issue
- the quickness with which issues are resolved
- and whether or not it was easy to speak with a customer service representative.
ATM withdrawal fees
This should only ever be done with a debit card unless you’re in an emergency. Credit cards, including those best for travel, are notorious for charging disgustingly high fees if you use them to withdraw cash.
What’s more, you could even be hit with higher interest rates if you don’t pay off your statement (but I know readers of this article will because I literally will not stop talking about how important it is to pay off the entire thing).
ATM withdrawal is something that needs to be planned for in advance and accounted for in your budgeting. Here are some strategies to get you started:
- Inform your bank before traveling, so that your account doesn’t get flagged for suspicious activity.
- Always order some money in the currency of your destination(s) so that you can pay cash if necessary.
- If your bank imposes fees on foreign ATM withdrawals, consider opening another checking account with a company that does not charge fees.
- Building on that last point, you can also open an online money transferer before you leave. Personally, I swear by Wise (formerly Transferwise) to facilitate traveling with the right currency. These accounts are easy and free to open and often have very favorable conversion rates and ATM withdrawal stances.
Best credit cards for travel abroad
There are a lot of options out there, and you can really run yourself in circles trying to understand which card is best for you. When I was researching for this piece, one of the first articles I came across was about how to choose the nine best credit cards for travel. Nine.
Even as an experienced traveler who has somewhat gotten over her reluctance to make large purchases on a credit card, I cannot imagine juggling nine cards at once right out of the gate.
Is there merit to developing a comprehensive understanding of how different travel credit cards can work together, and steadily expanding the cards you hold in your name? Of course. Am I probably excessively cautious, considering that it’s been five years and I still only have one credit card that I regularly use? Probably.
And yet, let’s focus on getting set up with a solid first travel rewards credit card before we shoot for the travel card flush.
Below is a short, quickie list of cards that are worth looking into as a beginner wading into the travel credit card scene. First up is my tried-and-tested favorite from Capital One.
Capital One Venture Rewards
- Earn 75,000 bonus miles when you spend $4,000 on purchases within 3 months from account opening.
- Earn 2 miles per dollar on every travel and restaurant purchase.
- Receive complimentary secondary car rental car coverage.
- Two free passes to Capital One Lounges every year, plus two complimentary passes within the Capital One Partner Lounge Network.
- Earn 5 miles per dollar on hotels and rental cars booked through Capital One Travel.
- $95 annual fee.
- Learn more about the Capital One Venture Rewards Credit Card
Chase Sapphire Preferred
- Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening.
- Earn 2 points per dollar on every travel purchase.
- Receive 3 points per dollar on every restaurant purchase.
- Get complimentary access to DashPass which unlocks $0 delivery fees and lower service fees for a minimum of one year when you activate by December 31, 2024.
- Through March 31, 2025, cardholders earn 5 points per dollar on Lyft rides.
- $0 foreign transaction fee.
- Learn more about the Chase Sapphire Preferred Credit Card
Note: Both of the cards above require what is considered a good-to-excellent credit score (700 to 750 and above) to apply. Below is a card that appeared on several lists as accessible for people with what is considered fair credit (650 to 699). However, the official site does note a preference for a baseline good credit rating.
Capital One Walmart Rewards
- Earn 5% cash back in Walmart stores for the first 12 months
- $0 annual fee
- 5% back on Walmart.com & in the Walmart app, including grocery pickup and delivery
- 2% back on restaurants and travel, and at Walmart Stores, Walmart & Murphy USA gas stations
- 1% back everywhere else Mastercard® is accepted
- $0 fraud liability for unauthorized charges and $0 foreign transaction fee
- Learn more about the Capital One Walmart Rewards Credit Card
Disclaimer: The card details on this page have not been reviewed or provided by the card issuer.
So, after all that: Are travel credit cards worth it?
Travel credit cards are absolutely worth it as long as you are able to follow the golden rule of credit card use: You must pay off the balance in full each month to avoid interest charges.
Additionally, in addition to the aforementioned benefits, travel credit cards enable US citizens abroad to continue doing something very important: building strong credit in the US.
Even if you’re absolutely sure that you’re never going to return to the US, no one in the history of living has ever regretted having a strong US credit score.
Also, by maintaining a strong credit and getting into the points game, you can continue to benefit from sign-up bonuses and points transfers by strategically building your travel credit card arsenal over time.
What about the annual fee?
Although many people are put off by the annual fee associated with many travel credit cards, I can attest to the fact that they’re absolutely worth it. They often pay for themselves over the course of the year. I’ve been using my trusty Capital One Venture card since 2018, although I do intend to upgrade soon. (To spring for the Chase Sapphire Reserve or stick with Capital One upgrade to Venture X… that is the question.)
Over time, these benefits can outweigh the card’s annual fee. However, their worth depends on individual spending habits and travel frequency. If you travel often and can pay off the balance monthly, they’re a great asset. But if you rarely travel or carry a monthly balance, the interest and fees might outweigh the benefits.
In closing
As always, your personal needs and spending should be assessed before you commit. If you can remember the golden rule and figure out how you’re going to qualify for the sign-up bonus, you’ll be well on your way to becoming a confident travel credit card holder.
Additional References
https://www.forbes.com/advisor/credit-cards/best/international-travel/
https://thepointsguy.com/guide/capital-one-venture-card-review/
Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved, or otherwise endorsed by any of these entities. Additionally, I am not a certified finance professional, and the opinions expressed within this article are based on my personal experience and knowledge.
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