How to Financially Prepare to Travel Abroad
Key Points
One of the most critical steps in preparing to travel abroad is determining your primary payment method whether it be credit or cash.
To avoid frozen bank accounts or declined credit charges, contact your financial institutions ahead of time and notify them of your travel plans.
Spending a small amount now on travel insurance could save you a large financial loss and many headaches in the future.
While traveling outside the US is exciting — often it’s fulfilling a lifelong dream — planning can be stressful. While it’s easier (and more fun) to focus on things such as where to eat and what activities to book, it’s necessary to also prepare financially.
Traveling Abroad With Credit Cards
One of the most critical steps in preparing to travel abroad is determining how you’ll pay for things. There are many reasons to use credit cards when traveling internationally. First, you earn and redeem reward points. Second, there’s also in knowing that should they be stolen, your credit card companies generally take care of the funds. There is a key reason not to use credit cards, however: foreign transaction fees.
It’s easy to overlook foreign transaction fees, but this small cost quickly adds up, throwing off your trip budget. If you intend to use a credit card, it’s important you are using a card that won’t charge you a transaction fee on every foreign purchase you make. Check what the policy is on your current cards and consider opening a new card that may better suite your needs.
Traveling Abroad With Cash
Although many people nowadays do tend to prefer to go cashless, cash is something to heavily consider as you travel abroad. Using cash as your primary payment method will help you avoid unnecessary transaction fees imposed by credit card companies as well as protect yourself from identity theft. Should you intend to use cash, I recommend that you withdraw cash before you leave the US. Once you’re abroad, it can be very difficult to find your specific bank’s ATM, especially at the moment you need it. ATM transaction fees can be hefty. Consider how much cash you’ll need for your trip and withdraw accordingly.
You’ll want to exchange your American dollar for the local currency. When you’re using cash abroad, it’s important to familiarize yourself with that country’s currency and current exchange rate, so you understand the value of your dollar. Not only do different banks offer different exchange rate conversion fees, but they also charge foreign exchange fees. Airports, in particular, can be very expensive to exchange at. For this reason, it is recommended that you exchange an appropriate amount of money before you even leave.
Each payment method available has its own considerations. We recommend a hybrid of both. When you carry multiple forms of currency as you travel, you’ll be prepared for whatever situation you might find yourself in.
Notify Your Banks and Credit Card Companies When Traveling Abroad
One way to ensure there are no hiccups in your trip is to contact your financial institutions and notify them of your travel plans. Significant variations in spending patterns and location can raise red flags and result in frozen accounts or declined credit cards. Nothing is more frustrating on vacation than having your payment method declined as you try to enjoy yourself. Notifying your bank has been made easy. Often there is a section online for travel updates, and if for some reason there isn’t, it’s an easy phone call.
Yes, Travel Insurance Is Worth It When Traveling Abroad
No one wants to considering worst-case scenarios, especially when planning the trip of a lifetime. But accidents do happen, and usually at the most inconvenient of times. Considering the covid-19 pandemic, and the world’s volatility, spending a small amount now could save you a large financial loss and many headaches in the future.
Consider your options for travel insurance as you book your flights and hotels. If you have a travel card, check what the benefits offered are. Many travel cards offer benefits such us baggage or trip delay insurance. Make sure you review the specific terms for your card, many cards will require that the trip or item was paid for in full using that card.
If you’re going to be traveling for an extended period of time, we encourage you to check in with your financial planner. We can help ensure you have the proper estate paperwork in case something happens. Plus, it’s always good for us to know where you are in the event we need to reach you.
Disclosures:
This article is not a substitute for personalized advice from Capstone and nothing contained in this presentation is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed by other businesses and activities of Capstone. Descriptions of Capstone’s process and strategies are based on general practice, and we may make exceptions in specific cases. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.