Fees and scams: Eight things to know about using credit cards overseas

Cash is no longer king. Travel overseas these days and you’ll probably find yourself paying for just about everything using a chip-and-PIN card inserted into a payment terminal, or making contactless payments.

That’s convenient, but care is needed. Scammers lie in wait, and if you use the wrong card you could end up paying more than you need to due to currency conversion fees that work against you.

Cash is no longer king overseas.Credit: Getty Images

The dynamic currency conversion trap

When you’re overseas and paying by card, a merchant, waiter or hotelier might ask if you’d like to make the transaction in Australian dollars. While the Aussie dollar option might sound like a great idea, you’re electing to pay at the Dynamic Currency Conversion (DCC) rate. This loads a fee, generally between 3-5 per cent more than if you pay in local currency, even after paying for the currency conversion. Westpac’s own Merchant Services website page states, “You will generate revenue on every DCC transaction”, and that revenue comes straight out of your pocket.

If you select the DCC option, before you approve payment you should be able to see the currency conversion rate that applies to the transaction, with the possibility of backing out at that stage, but you’ve got to be on the front foot to stay abreast of the current exchange rate. The same applies to ATM withdrawals. You might see a message on the screen saying “This ATM offers conversion to your home currency.” If so, decline and select local currency.

Best card for pre-authorisations

Check into a hotel or hire a car and you’ll probably be asked to hand over a card for the pre-authorisation. Nothing will be charged to your card at this stage, however it puts a block on the available funds you have on that card. It’s important to use a credit card for the pre-authorisation.

Use a debit card and some of your available funds will be frozen, and hotel pre-authorisations can easily run to $100 per day. When you check out of the hotel or return your hire car the pre-authorisation will be cancelled, but it might take up to two weeks before your financial institution clears the transaction and returns the blocked funds to your account.

Use contactless payments

Contactless payments made using either a card or a digital wallet such as Google Pay or Apple Pay are more secure than paying with a card inserted into a payment terminal and authenticated with a PIN. The information that is retrieved when a card is inserted into a terminal can be hacked, but in the case of contactless payments, your card or digital wallet details are not shared with the merchant during the processing of the transaction. Contactless payments use tokenisation, replacing the card details with an alternate code, the “token”. Even if a hotel, restaurant or retailer you’ve paid is hacked, the hacker cannot gain access to your credit or debit card details.

However, contactless payments don’t always work overseas. Sometimes you will have no choice but to insert your card and key in your PIN, but make contactless payments your default choice.

How to spot an ATM skimmer

ATMs inside bank premises offer greater security than hole-in-the-wall terminals.Credit: Getty Images

Wiggle the card slot to check for any loose attachments. If it looks bulkier than usual, that could be a sign of a potential hazard. Always use your free hand to cover the keypad when you tap in your PIN, and ATMs inside bank premises offer greater security than hole-in-the-wall terminals.

Smart tips for using your cards

If you’re using a new card specifically to pay for your travels overseas, try using it before you head off.

If you’re relying on credit card travel insurance, check the fine print. Essentially, the traveller must use their card to pay for either all or a portion of their travels above a specified amount. If you’re hiring a car and declining the operator’s full damage waiver cover, make sure the excess cover that comes with your credit card insurance is sufficient.

It’s too easy to tap your card to pay for goods and services when you’re away without knowing how much it’s costing you in Aussie dollars until the transaction is complete. Xe has a currency converter app that tells you exactly how much that transaction is costing you in Aussie dollars.

When you’re out and about, don’t keep all your cards and cash in the same place. Take only what you need for the day. Two cards are sufficient, and if there are two of you, divide your cash and cards.

Keeping a low balance on your debit card helps protect you from fraud. Some cards can be frozen when a transaction is completed by using an app associated with the card, preventing any further transactions until the card is unfrozen via the app.

To prevent your card from being blocked, tell your bank or financial institution when and where you’re travelling. You can usually do this via their website.

Stick with your usual cards or go with a travel money card?

Travel money cards are essentially debit cards with a difference. Deposit Aussie dollars to your account and you can purchase foreign currency which is loaded onto a card. That foreign currency can be used overseas to buy goods, settle bills or withdraw from ATMs.

If you’re hopping around between countries you can select to have your Aussie dollars converted into several currencies. This is sold as a convenience, but that’s not always so. Say you have your travel money split 50-50 between euros and UK pounds.

If you don’t have enough pounds to cover a UK transaction the card will borrow from your euros. You’ve made two currency conversions, from dollars to euros and euros to pounds, and on each of those conversions your dollars are worth less due to the exchange rate.

That’s one reason I keep my travel money card loaded with Aussie dollars and accept the currency conversion rate at the point of exchange, whether it’s an ATM, a hotel or a restaurant.

Which card?

I’ve been using the Wise Travel Money Card since pre-COVID days, and in Europe, Asia and North Africa it’s never let me down. My Aussie dollars are converted to foreign currency at the mid-market rate which is as good as you’ll get.

As well as a physical card, my Wise card is stored in my digital wallet. I can freeze and unfreeze it using the app, I can keep the balance low, and it takes only minutes to transfer funds to the Wise card from my bank account. It’s also the preferred card for many frequent travellers.

The ‘fee-free’ currency conversion myth

Some travel money cards offer fee-free currency conversions, but as financial institutions tilt the exchange rate in their favour, the “fee free” claim is irrelevant. The crucial question is how much local currency your card provider gives you for the Aussie dollars you deposit. Find the current mid-market rate by using the XE app.

Card comparison

How much would it cost to load $US1000 or €1000 onto a travel money card, from best to worst? (Prices at February 11, 2025)

Wise Travel Money Card
$US1000 will cost $1600.92
€1000 will cost $1648.70

CommBank Travel Money Card
$US1000 will cost $1658.65
€1000 will cost $1712.33

Qantas Pay Card
$US1000 will cost $1669.78
€1000 will cost $1728.91