This presents Americans traveling abroad with a major problem, as in some countries it is no longer possible to sign for a transaction but requires a chip and pin system. “Chip” refers to the microchip in the debit or credit card, while the “PIN” is a four digit number only the cardholder knows. Americans are used to entering a PIN number for cash withdrawals at ATM machines, but the system doesn’t work for many other transactions when abroad.
So, what are the payment options for Americans traveling abroad? Cash is carried by most American travelers, but should only be in small amounts for security reasons. The reality is you have no recourse if you lose cash or have it stolen: both instances can easily ruin your travel plans. A sensible rule is to only carry enough cash on you for small incidental purchases and keep any excess securely locked away in a safe where you are staying.
US traveler’s checks remain a favorite option for many Americans traveling abroad. Traveler’s checks are relatively safe and are registered to you, so if you lose them or they’re stolen, no one else ought to be able to cash them (at least in theory, however, this is not always the case). There are many reports of checks being cashed through organizations that don’t go through the correct ID procedure and, if you have your passport or ID stolen at the same time, it can make it easier for the criminal to cash them. It’s often the case that by the time a person realizes the checks are missing and reports it, they’ve been cashed. An additional problem with traveler’s checks is that you pay cash up front to get them, so if they get cashed by someone else it’s difficult, if not impossible, to get your money back.
Using a debit card is an option that’s reasonably safe. If you’re in a country with Chip and PIN technology you may have difficulty using it for certain transactions. You can, of course, get money from ATMs worldwide, but there are usually associated charges and you have the difference in rate of exchange. If you use debit for purchases abroad you don’t get the protection offered by credit card companies. The transaction is immediately debited to your checking account and if it’s wrong, or the goods prove to be faulty, it’s unlikely you can get your money back. Remember, if you use your debit card for car rental or paying for hotel accommodation, the company will take a security deposit which is debited immediately to your checking account. You need to be certain of the amount they are taking, as you could end up not having enough money in your account for other purchases.
Finally, there’s the credit card. It’s probably the safest way to pay for goods and services, provided you don’t have to concern yourself with Chip and PIN. Credit cards can be used in practically every country in the world and at almost every outlet. You get payment protection and with some credit cards, a guaranteed replacement in 24 to 48 hours should it get lost or stolen. It’s important to ensure you have plenty of available credit before your travel from the USA, as getting a credit increase while abroad could be difficult. However, using a credit card to withdraw cash abroad should only be done as an emergency. You pay for withdrawing the cash, and then you have the rate of exchange that is often worse than at exchange bureaus or banks, and often a percentage of whatever you withdraw is also taken as a fee. Additionally, you get charged interest daily on the money you withdrew.
Before you travel abroad, check with your bank about getting a card with Chip and PIN technology. Several US banks offer a card specifically for use when traveling abroad, which will make life easier and safer.
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