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Disadvantages of Using a Debit Card Abroad

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Travelling to a foreign country is an experience that everyone craves and constantly plans for. It’s all about which palm tree to spend your holiday under, waving your card in the streets at the most recommended local restaurants.

However, it is crucial to understand the potential dangers of using debit or credit cards abroad. Although these cards have become popular, they have drawbacks that can affect our travel experience and even our wallets.

In this blog post, we will look at the disadvantages of using a card when travelling outside your home country, shedding light on important considerations and providing alternative solutions.

Is it better to use a card to pay for things abroad?

Today, it is rare that someone carries a pile of cash in their pocket, which makes them feel safer and more solid. Usually, when travelling, people wave a plastic card to pay for expenses and visit ATMs to withdraw cash whenever they need it.

However, even though card payments are fast, secure and make it easy to keep track of expenses, debit cards are a less popular choice for overseas due to some disadvantages:

Costly foreign transaction fees

Many debit cards have foreign transaction fees. These are additional fees for each foreign currency transaction. The fees can range from 2% to 3% of the transaction amount. As a result, it increases the total cost of purchases.

ATM withdrawal fees

When using your card to withdraw money from ATMs abroad, you may incur ATM withdrawal fees. These fees can vary depending on the ATM operator or your bank and can add up quickly if you make multiple withdrawals.

Currency conversion rates

Debit cards often apply their exchange rate when converting foreign currency transactions into your home currency. These exchange rates may not be as favorable as market rates. Therefore, each transaction may incur additional costs.

Lack of credit card benefits

Unfortunately, unlike credit cards, debit cards often do not offer additional benefits such as travel insurance, purchase protection or reward points. Thus, if you use your debit card for transactions abroad, you may not benefit from these advantages.

Card blocks

It can be frustrating when your debit or credit card is rejected in a foreign country because of security measures. To avoid this, inform your card provider of the travel dates and destinations. If your payment card is still blocked, call the number on the card’s back to confirm your identity and cancel the blocking. It is also a good idea to carry a backup card or to consider possible alternatives.

📚Related: Debit Card Fees

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Debit vs. credit card

First, whether to use a debit or credit card abroad while spending abroad depends on your preferences, spending habits, and the card contract terms. If you plan to pay mainly by card or withdraw cash at ATMs in the card network, a debit card is more suitable.

Certain banks do not charge fees at their ATMs. So if you have a card from a partner bank of your credit card providers and use it at an ATM belonging to another network, you may be able to avoid transaction fees. It is worth noting that currency conversion fees may still apply.

On the other hand, a credit card may be a better choice if you want to spread the cost of your travel over time or if you want to get money back on your spending. However, you need to bear in mind the additional interest costs, especially for cash withdrawals at ATMs.

Finally, it is essential to review the terms and conditions of specific cards. Then you can decide which option suits your needs and offers the best deal for your trip.

Alternatives to credit and debit cards

The most basic alternative to any credit card is, of course, cash. Unfortunately, this is not the most convenient and secure payment method. However, as technology has improved, more alternatives to cash and bank cards have become available.

Online payment platforms

Online payment platforms often offer convenient peer-to-peer payment options. For instance, swissmoney provides digital wallets. In them, you can store funds and make payments online.

Furthermore, the swissmoney platform is easy to use, and the onboarding process is smooth and fast. Once you have an account, you can add a new crypto wallet, order a bank account or get a virtual payment card for easy transactions.

Cryptocurrencies

Cryptocurrencies are decentralised digital currencies that you can carry out transactions. They operate on blockchain technology and are an alternative to traditional banking systems. However, cryptocurrencies can be volatile and may have limited acceptance in corporations.

Mobile banking apps

Many banks and non-banks now offer online banking and mobile banking apps. These apps allow customers to manage their finances, make payments and transfer funds using their smartphone. It often provides convenience and flexibility when banking on the move.

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Prepaid cards

Prepaid card is an alternative to traditional cards. They work by loading a certain amount of money onto the card in advance. A prepaid currency card can be used for online and in-person purchases. However, they do not provide a credit line and can only be used up to the available balance.

FAQ

Is it better to use cash or debit cards abroad?

The choice between using cash or cards abroad depends on personal preference and specific circumstances.

Cash can be convenient for small transactions in places where card acceptance is limited, and payments are made only in local currency. Cards, on the other hand, offer security, convenience and traceability.

However, it is worth having a combination of both or even having more than one card to ensure flexibility.

Do I get charged for using my debit card abroad?

Yes, using your bank card while abroad may incur foreign transaction fees, ATM fees and currency conversion fees. It is advisable to check with your bank or financial institution to find out exactly how much these fees are.

How do I avoid charges on my debit card abroad?

There are a few steps you can take to avoid charges for using your bank card abroad.

First, research and choose a card that offers favourable conditions for use abroad. It may include a low foreign transaction fee, ATM withdrawal fees, or even none. You can also inform your bank or financial institution of your travel plans to avoid possible blockages or flagged transactions.

Also, only use ATMs of your card network or partner banks. You may also want to consider withdrawing more money. It will help you use ATMs less often and avoid unnecessary cash withdrawal fees. It is also advisable to pay in your local currency to avoid dynamic currency conversion or other hidden fees.

Finally, keep track of your transactions and monitor your account regularly to identify any unauthorised charges or discrepancies.

What are the 2 disadvantages of debit cards?

The two main disadvantages are:

1. Limited protection against fraud.

A debit card offers some protection against fraud. However, it is generally not as strong as credit cards. Therefore, if you notice unauthorised transactions, it may take time and effort to resolve the problem and recover lost funds.

If you use a credit card, you can dispute charges before confirming payment. In contrast, debit card transactions are debited directly from your bank account, which can be more complex to recover.

2. No building credit history

The debit card does not contribute to building a credit history or improving credit scores. Unlike credit cards, which can help build a positive credit history, they do not affect your creditworthiness.

It is unfavourable if you want to build credit or apply for a loan or mortgage, as lenders often take credit history into account when making lending decisions.

Should I choose a credit or debit card?

The choice depends on your financial habits, goals and preferences. A credit card allows you to borrow money from the card issuer up to a certain limit. In contrast, a debit card allows you to make purchases using the funds in your bank account.

Before making a decision, it is advisable to assess your needs and consider the advantages and disadvantages of each option.

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Živilė Šarkauskaitė

Živilė is a writer with a diverse background, having worked with tech start-ups and pioneering brands across various industries. Her profound interest in progress and innovation drives her to the field of Fintech, a realm that sparks her curiosity and inspires her to share insights with others.

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Disclaimer

Please be advised that the information presented in this article is intended for general informational purposes only. It should not be construed as professional advice from swissmoney. It is important to note that swissmoney does not act as a financial adviser, and individuals are strongly encouraged to seek independent advice from qualified legal, financial, or accounting professionals before making any decisions related to cryptocurrency investments. Furthermore, investing in cryptocurrency assets carries inherent risks, and individuals should be aware that they may potentially lose all of their invested capital.

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