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Tips For Using Your Credit Cards When Traveling Abroad

Tourist couple walking in city with suitecasePlanning a trip abroad this summer or fall? Good for you. Visiting foreign countries, whether in Europe, Central America or the Far East, can be both fun and educational. And let’s not forget out neighbors to the north and south – Canada and Mexico. They’re both great places to visit and Canada comes with an added plus. We all speak the same language.

A big reason to visit Europe

Now is a great time to visit Europe as the euro has lost nearly 25% of its value versus the U.S. dollar. As an example of this let’s take a hotel room in Paris that costs 300 euros. It would have cost you around $415 to stay in that room 12 months ago, when euros cost $1.385. But now that euros cost $1.06 that same room could be yours for just $318.

Regardless of where you intend to vacation there’s always the issue of how do you access your funds. There are several ways to do this and one of the most popular and simplest is to use your credit cards. They’re both a convenient and effective way to pay for things as you travel. Unfortunately, there are some downsides to using credit cards when abroad. It’s important that you know how to use a credit card when outside the US to make sure that you will have both a safe and enjoyable trip. You definitely want to keep your credit card(s) safe and here are some strategies that could help you do just that.

Inform your credit card issuer

First, it’s wise to let your credit card issuer know if you will be traveling outside the U.S. The card companies have security software to avoid fraud. The result of this is that your card could be declined if you use it someplace unusual. This makes it a good idea to let your card company know you will be traveling, where you’ll be going and when you’ll return.

Avoid high service fees

If you use your credit card within the euro zone your purchase transactions will be free. However, if you make an ATM cash withdrawal within the euro zone you may be charged a high service fee. Be sure to check with your credit card issuer on this before you begin traveling. Make sure you remember the different interest rates on your different cards and their fees for converting currencies, if any. And if possible try to use the card the most that has the lowest interest rate.

Check your perks

You may not be aware of this but there are credit cards that come with perks when you’re traveling but the benefits provided by different cards are not the same. These benefits could include concierge services, medical travel insurance benefits, rental car discounts and free breakfasts at hotels. There are also cards that offer rewards or points when you use them to pay for a flight, a hotel stay and more. If you carry more than one credit card try to choose the one that will get you the best rewards. If you find that none of your cards offer these types of rewards you might think about getting a new one just for your trip.

Be safe, not sorry

If you carry multiple credit cards when traveling abroad don’t keep them all in one place. Do this and you run the risk of having them stolen or lost. When you leave your hotel room to go out for sightseeing or dinner, you might leave one of your cards in your hotel room and then take the others with you. Also be sure to watch out for skimming devices when you use your cards at unusual locations. Try to check out your credit report from time to time to make sure you have not fallen victim to ID theft.

Get a prepaid card?

Depending on where you will be traveling you might consider getting a prepaid card. The functionality of these cards is quite similar to those of a debit card but the money is not deducted from your checking account. That way if you run into any kind of problem, your checking account won’t be affected. Instead, you’ll have to deal only with what’s on the card. You should be able to get a prepaid card very easily at your bank.

Magnetic stripe or “Chip and PIN”?

Don’t make the mistake of thinking that your credit card will be accepted wherever you go. In addition to talking with your credit card company you might want to talk with your travel agent or your destination hotel. Restaurants, hotels and gift shops generally accept credit cards with magnetic stripes. However, you may find there are places such as small retail stores and automated kiosks that accept only what are called “chip and PIN” credit cards. If you think this could be the case, and you don’t have one of these cards, you may need to contact your bank to get one before leaving

Why to carry multiple cards

You might use just the one credit card at home but it can be a good idea to carry multiple cards when traveling abroad – preferably ones from different issuers. The reason for this is simple. Not every credit card is accepted globally, meaning that a second credit card could come in very handy. If you were to run into a situation where your main credit card isn’t accepted, you’ll have a backup that might work.

Have a budget and stick to it

When you plan that dream vacation abroad be sure to calculate how much you can afford to spend. While credit cards can be helpful and convenient they can also be way too easy to use. Don’t let yourself get carried away and spend $200 for that jacket that you hadn’t budgeted for or $400 for that really cool camera. Carry your itemized budget with you on your smart phone or pad and check it periodically to make sure you’re staying on track. That way when you get home you’ll have a credit card bill(s) you can live with and not one that will cause you to faint away from shock.

The Two Things You Really, Really Don’t Want To Do With A Credit Card

man holding out credit cardsCredit cards when used sensibly can be very helpful. There are safer than carrying a big wad of cash and most will protect you from identity theft or if your card is stolen. They do this by limiting your liability to $50 – and in some cases will even waive that. Of course, you’re expected to report suspicious transactions as quickly as you can.

How a credit card can help

A credit card can be very helpful in building a credit history. Again, this assumes that you use it sensibly. But when you put a few charges on a credit card and then pay off your balance at the end of the month this will help you create a good credit history that tells potential lenders you could be trusted. This will also save you money, as you should be able to get a mortgage or personal loan at a lower interest rate.

If you choose the right credit card you could earn some great rewards. The credit card business is very competitive these days so why not take advantage of it? Depending on the card you choose you could earn cash back, points or airline travel miles.

Last but certainly not least using a credit card for your everyday purchases can help you track your spending and see those areas where you could make cuts and save money you could tuck away into savings or invest.

What you really don’t want to do

Using a credit card to make everyday purchases can be a really good thing – if you pay off your balance at the end of the month. However, if you make just the minimum payment and carry a balance forward into the next month you may quickly slide into trouble. This is due to a little thing called compounding interest. What this means is any interest charges are added to your principal (which is the amount you originally charged) so that your debt grows exponentially.

For example, if you have a balance of $100 on a credit card and it accrues 10% in interest every month, you will be charged $10 the first month. Then with compounding, that $10 will be added to your original debt so now you owe $110. The next or second month you will again be charged that 10% interest but this will be $11 meaning that you now owe $121. And on and on. When you understand this you will understand why some people end up paying more than $1200 in interest on a $5000 credit card debt.

credit card trapWhat you really, really don’t want to do

While you don’t want to fall into clutches `of compound interest there is something else you really, really don’t want to do and that’s to take cash advances. The credit card companies generally have very high fees and interest rates on cash advances. Plus they usually start charging interest immediately. This makes it unlike purchases you make with your credit card, which gives you an interest-free grace period that could be as many as 30 days based on your billing cycle. In fact, if you were to make a purchase the day after your billing cycle you might actually have closer to 60 days interest-free.

Sky-high interest

If you take a cash advance on a credit card with a 12% interest rate, don’t think for one minute that you’ll be charged 12% on it. What’s more likely is that your interest rate will be a sky-high 24% or twice as much as the interest rate on your purchases. In addition, cash advances often have a fee, which is usually either 5% of the advance or $10 whichever is higher. What this translates into is that if you were to get a $1000 cash advance it would cost you an additional $69 even if you repaid it in full within 30 days.

Cash advances you won’t see coming

It’s also possible that you could have a transaction that’s treated as a cash advance without you knowing it. This is because there are transactions that are treated as cash advances if you pay them with a credit card. Included in this group are money orders, wire transfers, legal gambling purchases and bail bonds.

Sometimes it’s the best option

While a cash advance can be extremely costly it can be okay to get one if it comes down to a choice between a cash advance and getting a payday loan. This is because there are online payday lenders that charge an annual percentage rate of, wait, take a deep breath, of as much as 652%. If you have an emergency and need just a couple of hundred dollars to hold you over for a few days until your next payday then a cash advance might be the best of several different bad alternatives.

The worst cards

There are several credit cards that charge even higher interest rates than the 24% quoted above. For example, First Premier Bank’s interest rate is 36% for a cash advance on its card. Next in line was the BP Visa and the Texaco Visa, which both charge 29.99%. And you might not want to take a cash advance on ExxonMobil’s SmartCard as it has an interest rate of 29.95% making it the fourth highest APR for cash advances.

If you’re having a problem with your credit card debt

Did you know that the average American now carries more than $6000 in credit card debt? If you have fallen into the trap of compounding interest and find that you owe this much or even more there are several ways to handle the problem. For example, you might get a debt consolidation loan with a lower interest rate than what you’re currently paying. Or you could get a debt management plan from a consumer credit counseling agency. Debt settlement might even be an option. However, what many Americans are now doing is driving for Lyft or Uber to earn extra money to pay off their debts. Driving for one of these companies can generate $500 or more a week and it’s something you can do whenever you like. There are no set hours and no one watching over your shoulder to make sure you do a job. All that’s required is to register with one of these two companies and have a car and a smart phone. Then just start driving people around and earning money. It’s really that simple and could even be fun!

Credit Card Help For The Terminally Disorganized

smartphone anxietyDo your organization skills leave much to be desired? Are your credit card bills scattered all over the place? Are you constantly tearing at your hair wondering when your next payment is due or if you just missed a payment?

You can relax a bit because here is tips that can help you better manage your credit cards.

Make a list

If you really want to do a better job of managing your credit cards the first thing you need to do is make a list of them. The easiest way to do this is by using a spreadsheet program like Excel or Google Sheets (which is free). You’ll want to have a column for the name of your credit cards and columns for their balances, minimum pavements, interest rates and due dates. This should take only a few minutes — even if you have to do it with a piece of paper and pencil.

There, that wasn’t so hard was it?

Be on time

If you’re trying to manage multiple credit cards it’s critical that you have that list you’ve made so that you can be sure to make your payments on time. Being late on a credit card payment or missing a payment altogether can have a seriously bad effect on your credit score. Only FICO, the credit scoring company used by the overwhelming majority of lenders, knows for sure how much a late payment will damage your credit score but it is believed that it will reduce it by around 50 points. Be late with two payments and your score could drop by as many as 100 points, which could drop you from having good credit down to poor credit.

Create reminders

Now that you know your credit card due dates you should set up reminders. Most of the credit card issuing companies will send you email or text alerts to help make sure you make your payments on time. But instead of relying on them you might want to create your own notification system by setting up reminders on your computer’s or smart phone’s calendar. Just open your calendar app, go to the date a few days before a payment is due, set up the event as something like “pay Visa,” and then make it reoccurring every month.

Use auto pay

Credit card issuers usually have an automatic pay feature that you could use to ensure you make your payments on time. In most cases you have the option of choosing the minimum payment, the full statement balance or some other amount. Of course, it’s best to pay the full balance every month, which would keep you from piling up debt. Alternately, your bank probably offers online banking where you could set up your payments. Many people prefer this because it allows them to keep control of their payments as on some months they might want to pay the full balance while on others they might choose to make only the minimum payment.

Have your due dates changed

If you have three, five or more credit cards you have three, five or more due dates. One trick for making sure you pay your credit card bills on time is to call the issuing companies and have your due dates changed so that they all fall on the same day. Most credit card issuers will do this if you just ask. You might pick a date that’s three or four days after you get paid. It’s also a good idea to make sure that one due date doesn’t fall too close to big payments such as your mortgage or rent.

credit cardsDo a balance transfer

If you want to make things really simple you could transfer the balances on those multiple credit cards to a new one – that offers a better interest rate. There are also a number of 0% interest balance transfer cards available. If you could qualify for one of these you should definitely transfer the balances on all of your credit cards to it. You would then have just one payment due date, which would really simplify the task of making your payment on time. Plus, you would have anywhere from six to 18 months interest-free so that all of your payments would go towards reducing your balance. If you could double or even triple up on your monthly payments you might actually be debt-free before your promotional period ends.

Optimize your rewards

If you’re managing multiple credit cards with multiple rewards you might find it hard to keep track of the rewards categories offered by each of them. Again you should create a spreadsheet to keep all the information in one place. On this spreadsheet you will want to list the name of each card and the rewards it offers. You could then save the spreadsheet to your phone via Google Drive, Evernote or Dropbox so you could check the rewards before you use a card or make a payment. Another neat trick is to set up your wallet to be successful. This means organizing your credit cards by how frequently you use them. As an example of this, you could keep the card used for everyday purchases in your wallet at the top and then leave at home that airline rewards card you use only when booking flights or that card that offers the poorest rewards.

Know when enough is enough

If you use the tips you’ve just read in this article you should be able to do a better job of managing multiple credit cards and without running into trouble. But it’s important to know when it’s time to know enough is enough. If you find yourself tempted to add another card because of the juicy rewards it offers but you feel you couldn’t do it without losing control just listen to your gut instincts. No matter how generous that rewards program might be or how big the sign up bonus, it’s not worth it if you would end up being saddled with more credit card debt or constantly hit with late fees.

“Why Can’t I stay On My Budget?

We don’t know of a single financial expert that wouldn’t advise people to make a budget and stay on it – assuming you’re not one of that fortunate 1%. In that case you’re probably not reading this article anyway so it doesn’t matter.

Why is it important to have a personal budget?

It’s basically for the same reason that every successful business has a budget in the form of a business plan. It’s because without a budget, it’s practically impossible to know where you stand financially and what will happen to you and your family in the future.

How did you arrive at your budget?

One of the principle reasons why people fail to stay on their budgets is because they didn’t budget correctly. Maybe they tried to make a budget too hastily and without doing the homework first. The first rule of budgeting is that you must know where your money’s going so that you will know how to allocate it in the future. The only real way to do this is to track your spending for at least a month and by this we mean all of your spending – right down to that candy bar you bought at work. After those 30 days you will need to divide your spending into categories. There are a zillion online sites where you can find a list of these categories but the major ones all tend to be the same – food, clothing, utilities, transportation, medical expenses, debt payments, entertainment and so forth.

If you need help making a budget, watch this video from Bank of America …

Your budget is too inflexible

If you’re having a really hard time staying on your budget the reason may be that it’s too inflexible. The best way to think of a budget is like a football team’s game plan. While the team’s coach might have a complete game plan in mind, he will watch the game as it unfolds and then make changes accordingly. If you’ve become discouraged because you’ve “busted” your budget in several categories, don’t give up. Review the amount of money you’ve allocated to each category and then make adjustments. You’ll probably find a category or two where you didn’t spend as much money as you had anticipated. Take the money out of those categories and assign it to the ones where you were unable to stay within your budget. The important thing is to review your budget regularly and then make corrections just as a ship’s captain will tack and jibe as the winds change.

You failed to set goals

Your budget doesn’t exist in a vacuum. If you’re unable to stay on your budget the reason might be that it’s not linked to your goals. What are your goals? Is your goal to retire early, buy a second home, sail around the world or pay for your kids’ education? Since the real purpose of a budget is to save money you need to ask yourself why you’re saving it. When you have goals your budget will help you make progress towards achieving them, which can keep you motivated to stay on your budget. What’s best is to have both short- and long-term goals. You could then see you’re making progress towards realizing a short-term goal without becoming discouraged because you don’t see you’re making much progress towards achieving a long-term goal – especially when things get tough. As an example of this it can be discouraging if your only goal is early retirement and you suffer a setback in your career and feel you’re not saving enough money to achieve it. But if you also had a short-term goal of taking a nice two-week vacation next year and you see you have almost enough money saved to pay for it, you might feel less discouraged and more motivated.

Your partner isn’t onboard

There’s an old saying that it takes two to tango. It also takes two for a budget to work. If your spouse or partner isn’t interested in budgeting or consistently fails to stay within your budget for whatever reason, the two of you need to have a serious talk. You should sit down with your spouse or partner and try to determine what can be done to get them to buy in. You will need to discuss your financial philosophies and have all your numbers available. You might be able to show him or her that your budget isn’t terribly restrictive and that there is room to make changes. Try to get him or her to understand that your budget is a roadmap designed to get you to your important goals. If your spouse sees he or she won’t have to make drastic changes in their lifestyle you may get more cooperation. If you can stay calm during this discussion – without getting upset – you may find your spouse will be more willing to work with you.

There was no emergency fund

Every budget needs to include an emergency fund. This is so that when you run into an emergency and, trust us, you will eventually run into an emergency, you will have the money to pay for it without having to run up debt. Most financial experts say that you should have the equivalent of six months of living expenses in your emergency fund. If the idea of saving this much money seems too awful, try for at least three months worth. If you don’t already have an emergency fund, make it a line item in your budget so that you’re saving money for it every month. One easy way to do this is to have the money automatically withdrawn from your checking account and deposited into your savings account each month. You might think of your emergency fund as a personal life insurance policy but that the “premiums” are yours to keep.

You didn’t give it a sufficient amount of time

If you made your budget just a few months ago and feel it’s just not working then maybe it’s because you didn’t give it enough time. One way to overcome this is to consider those first few months to be a sort of beta test and now you’ve learned enough to make a real budget. It can take time to smooth out a budget and for you to make changes in your spending habits. Don’t beat up on yourself if you haven’t been able you stay on your budget for those first few months. Professional athletes didn’t get to be the way they are overnight so don’t get discouraged if you haven’t become a professional budgeter in just a few months.

You just hate budgeting

If you find you just hate budgeting what with all that software, columns and rows of numbers, you need to look at other ways to manage your money that would eliminate this. For example, you might withdraw the cash you need for a week or two weeks at a time with the idea that when it’s gone, it’s gone. Or you might try the program Mvelopes, which is based on the old envelopes strategy for budgeting. This is where you divide your paycheck into envelopes based on your categories. Then when that envelope is empty, that’s it. You can’t spend any more money in that category. Of course, with Mvelopes this all happens digitally on your computer and not in actual paper envelopes.

If neither of these options appeal to you and you just hate budgeting, what can you do? You will need to do some research to see if you can find a money management plan that would help you achieve your goals without that terrible demon called budgeting.

12 Keys To Making Better Decisions About Your Personal Finances

man fanning money near his earDid your parents teach you to be a smart money manager? If so, consider yourself lucky. Most parents will talk to their kids about the birds and the bees but not about budgets and CDs. They must assume we’ll pick it up on our own, which is how most of us learn about personal finance. The Irish writer and poet Oscar Wilde once said, “Experience is simply the name we give our mistakes.” Unfortunately this is how many of us learn to be better money managers. We make mistakes like maxing out our credit cards, learn the consequences and become smarter about money.
Keys to making better decisions

If you’d rather not learn how to make good financial decisions by making bad ones and learning from them, there are some keys to making better financial
decisions …

Be brutally honest with yourself

If you’re not careful you can fool yourself into making some really bad financial decisions. For example, you could decide to borrow from your 401(k) because, heck, you would be paying interest to yourself. Or you might buy furniture you don’t really need because of the lure of zero interest financing. These are the kind of decisions where you could be deceiving yourself into financial problems. Be brutally honest with yourself about all of your decisions and the motivations behind them. Do you really need to borrow from your 401(k) to buy that new car or could you just save money for a year or 18 months and then pay cash? And while 0% interest can be a good deal in some cases you shouldn’t use it as an excuse to buy something you don’t really need. A good rule of thumb is that when in doubt, get a second opinion from a family member or friend that you know is good with his or her money. As George S. Clason once wrote, “It costs nothing to ask wise advice from a good friend.”

Watch out for fees

There are almost always fees attached to things that have to do with finances – credit cards, banking, investments and other financial products. It’s absolutely critical to keep fees low especially when it comes to investing. Making money in the stockmarket is tough enough by itself without paying fees that wipe out your gains.

Use cash not credit

Whatever you do, don’t finance your lifestyle on credit. Credit card debt can just ruin your life. Pay cash for everything from groceries to vacations to cars. If you need to make sacrifices to pay cash, do it. Using credit to buy things is the equivalent of stealing money from yourself in the future. Every cent you borrow must be paid back and often at very high interest rates. As the Persian poet Omar Khayyam wrote, “Take the cash and let the credit go. Nor heed the rumble of a distant drum.”

Save a dime out of every dollar

This is very simple but very powerful. Make a habit beginning right now to save at least 10% of your gross pay. Save 20% or even more if possible. If you don’t doubt what this can mean to your lifer, read the book The Richest Man In Babylon by George S. Clason.

Think long-term

Ours has turned into a “get rich quick” society. But if you really want to build lasting wealth, you need to think long term as you make your financial decisions. This puts everything into perspective from a $4 latte at Starbucks to how much you should invest in your 401(k). As an example of this, if you think long term you would realize that a daily $4 latte eventually adds up to $21,056 over 10 years. And investing $1000 a month beginning at age 25 (instead of age 35) generates $1.7 million more by age 65.

Learn to live with uncertainty

While you may think you should avoid uncertainty like the plague when making financial decisions, the problem is that it costs a lot to avoid it. For example, the insurance industry thrives on uncertainty when it comes to cash value life insurance and annuities. However, some protection against uncertainty is unavoidable such as term life insurance and auto insurance. Be sure to think twice before spending a lot of money in return for guarantees.

For example, this concept can be especially important if you are evaluating an annuity. Annuities can be part of some financial plans but there are always fees associated with these products and they tend to limit the upside. An annuity will generate a constant stream of payments but at a high cost. The key here is to think carefully before spending a lot of money to avoid uncertainty. There are rewards to learning to live with it.

Keep things simple

There is an old rule of thumb that the more complex is a “solution,” the less likely it is to be your best option. For example, in most cases term life insurance is a better investment than complicated permanent life insurance products. And index funds are generally better than more complicated actively managed funds. One simple way to invest is in funds or ETF’s as this is usually better than complicated insurance products that have an investment component. In other words, all things being equal, simple is most often better.

stack of moneyHarness the power of compounding

It’s important to harness the power of compounding. Once you understand it, you can better evaluate your financial decisions to make sure they take advantage of it and not ignore it. If you’re not familiar with compounding this is where you earn interest on your investment and then interest on that interest. For example, if you started with $100 and added $100 a month at 2% interest, you would have $1,313.08 at the end of year one and then $2,550.64 at the end of year two and not just $2500.

Always consider the power of compounding whether it comes to paying off debt or how you need to be investing today.

Do the critical things first

Don’t put off the big financial decisions. Begin every day thinking about those things you need to accomplish and get to the important stuff first. Don’t put off actions such as preparing a will, investing for retirement or buying life insurance. When you do the critical things first, everything else will just be much easier.

Take responsibility for your actions

Despite what the politicians might want you to believe, you are not a victim. These people may tell you that the problem is corporate America or that the system is rigged but the result are the same – it makes us feel helpless. This is all nonsense that’s created to score political points rather than moving the country forward. Never play the victim.

Learn to think outside the box

Do you tend to view financial decisions in black and white? For example, do you believe that your emergency fund should always be in cash in a bank or that you should pay off all your non-mortgage debt before investing? These approaches to personal finance often turn out not to be in your best interest. Don’t make a financial decision without weighing the pros and cons and considering all alternate options.

Don’t be greedy

Your friend has a great stock tip that’s absolutely guaranteed to make you money. But you also worry that this might be too good to be true. When this is the case, it usually is. Whenever you’re faced with one of these deals you need to monitor your own emotions. You may be tempted by a get rich quick mentality. But think twice before acting as these deals often do turn out well.

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