If you plan to study abroad this year, relying strictly on cash and debit cards can be a gamble. Cash can easily be stolen. Debit cards can charge foreign transaction fees and don't have the same protections as credit cards. Rather than relying on cash, consider using credit cards responsibly for your overseas spending.
For starters, you'll get protection against fraud and the ability to instantly call and shut off the card if it does get stolen. Credit card companies won't hold you liable for transactions you didn't make, so you won't have to pay for any fraudulent charges on your bill. You can simply review your transactions and notify the company if you see anything unfamiliar. In contrast, when your debit card is stolen and used, the money is taken out of your account immediately and it might be up to you to prove that you didn't withdraw or spend the money. Additionally, credit card companies constantly scan for strange activity and can freeze your card if something looks sketchy.
Whether you're staying domestic or going abroad this year, credit cards have some undeniable advantages. But if you are studying overseas, four additional credit card considerations should be made:
Chip-and-PIN or Chip-and-Signature Technology
Conventional U.S. credit cards rely on a magnetic stripe to perform transactions. Anyone can grab your card and swipe, since most stores don't request identification. However, most of the world uses chip-and-PIN technology (a.k.a. EMV technology), which requires the owner to enter a 4-digit PIN with each transaction. If you want to use an automated kiosk to buy train tickets or pay for parking in Europe, you need EMV. These machines will generally not accept a mag-stripe card, and some merchants may refuse them if they're concerned about fraud.
No Foreign Transaction Fees
Many U.S. credit cards will charge a foreign transaction fee for every purchase you make abroad. Three percent is a typical fee, and they can add up quickly, especially when you're dealing with a less-than-favorable exchange rate. It's worth finding a card that doesn't have foreign transaction fees.
The better your credit score, the greater the credit card selection you'll have. Cards with travel rewards make a lot of sense if you're going abroad. You can rack up airline miles or hotel points, avoid baggage fees, and get other benefits like roadside assistance, a concierge, and trip insurance. Generally, the better the travel benefits, the better the credit score required to qualify for the card.
As I mentioned above, your card could be frozen if your transactions seem suspicious (which is more likely abroad). Having another card or two on hand could be helpful, especially if your card company needs to mail you a new card to replace a cancelled one. Whether you're overseas or in the U.S., you may also want cards from more than one issuer, since many merchants overseas won't accept American Express or Discover credit cards.
For students traveling abroad, I recommend the three credit cards below as possibilities. The first two don't require much of a credit history, while the third requires excellent credit, but has the best travel benefits:
1. Capital One Journey Student Rewards Credit Card
With no foreign transaction fees, 1 percent cash back on all purchases, and no annual fee, this a no-brainer for study abroad. One drawback: the card does not have EMV technology.
2. Citi ThankYou Preferred Card for College Students
This student card has EMV technology, and no annual fee. It offers two ThankYou Points per dollar spent on purchases for dining at restaurants and entertainment, and one ThankYou Point for other purchases. However, the ThankYou Preferred for College Students does have a 3 percent foreign transaction fee. So, you could pair this with the Capital One card and use it when you absolutely need EMV technology.
3. Barclaycard Arrival Plus World Elite MasterCard
This is only for students who already have a strong credit history. The card charges no foreign transaction fees, has EMV technology and offers two airline miles for every dollar spent and 10 percent miles back every time you redeem miles for travel. Right now, if you spend $3,000 within 90 days of activating the card, you get 40,000 bonus miles -- enough for a round trip flight within Europe. The $89 annual fee is waived for the first year.
Before you go abroad, evaluate the credit cards you have now and determine if you might want to apply for other cards. You'll be more protected, avoid debit card transaction fees and perhaps get some free flights or hotel rooms. As always, don't treat your credit limit as a budget. Credit cards will only be advantageous to you if you use them responsibly.