Protect yourself when spending money abroad

If you're headed to Russia for the 2014 Sochi Winter Olympics or traveling anywhere else internationally, choosing between using cash or your credit or debit cards might not be a simple decision.

For the Olympics, the U.S. State Department is advising U.S. citizens to be prepared to use cash for most daily transactions and to use credit or debit cards only at "banks and higher-class hotels and stores."

And at Olympic venues, you'll have little choice if you don't have a Visa-branded credit or debit card. That's because, as in past years, Visa has a monopoly on card use. Try to use any other brand of credit, debit, or prepaid debit card, and you'll likely be out of luck.

Visa says it's been in Sochi for months upgrading payment systems. There are be about 1,500 point-of-sale machines and 16 ATMs in and around Olympic venues capable of reading Visa-branded cards, and seven Visa customer-service booths, according to Visa.

For advice on choosing a prepaid card, check our prepaid card buying guide. And learn how to stay in touch without racking up big wireless bills.

Are credit and debit cards safe?

But as anyone who has been following the recent theft of credit and debit card information from the retailer Target knows, cards can leave you vulnerable to fraud. And those risks could be especially difficult to assess when traveling in other countries, where security may be even less stringent than in the United States.

Fortunately, federal protections apply to credit and debit cards issued in the U.S. even when those cards are used outside the country, says Nessa Feddis, deputy chief counsel for consumer protection and payments for the American Bankers Association. The protections limit cardholders' liability for unauthorized charges and require issuers to investigate billing issues.

While these protections are somewhat stronger for credit cards, even debit-card users should have little problem getting their banks to resolve fraud and other unauthorized charges as long as they report the issue quickly after discovering it, Feddis says. (Although credit-card rules sometimes allow you to dispute a charge if you're dissatisfied with the quality of the merchandise purchased with the card, such disputes are not permitted for transactions made outside your home state or more than 100 miles from your billing address. So think twice when buying expensive products outside the U.S., even if you're using credit.)

But even with federal protections, coming home from a foreign country only to find that a scammer or billing error has drained part or all of your checking account is something you'll want to avoid, especially if your mortgage payment or rent check happens to be due. Just fixing the problem could be a big hassle.

"I don't think you should use a debit card, which is a plastic pipeline to your checking account," says Bill Hardekopf, CEO of LowCards.com.

And both credit and debit cards contain information that identifies the cardholder, increasing the risk of identity theft. And scammers may try to duplicate those cards, creating even more headaches.

Are prepaid debit cards a better choice?

Reloadable prepaid debit cards, including those some banks market for use while traveling, could be an attractive alternative because they are loaded with a fixed amount of currency and aren't tied to the cardholder's bank account, limiting the potential financial loss. And they don't carry a cardholder's name or have other personally identifiable information.

But the types of reloaded prepaid cards that consumers are likely to purchase when traveling aren't covered by any of the federal protections that apply to credit and traditional debit cards. The Consumer Financial Protection Bureau has said it plans to propose extending some or all of those protections to general purpose prepaid debit cards. Unless and until that happens, consumers who want to dispute transactions on these cards must rely on the card issuer's willingness to investigate and correct bogus withdrawals. Some issuers have zero fraud liability policies that protect consumers from unauthorized payments due to a lost or stolen card. But it's not clear whether you'd be protected if there are others types of billing disputes, such as a merchant overcharge. The policies also may not apply to ATM transactions. (Note that gifts cards and other nonreloadable prepaid cards may not be useable outside the country. Check your card's terms and conditions.)

Using cash

The advantage of cash is that it's accepted virtually anywhere, and it doesn't lead to unauthorized charges or withdrawals, overcharges, or identity theft. But losses can be significant. And if you run out while traveling, you'll still need to use a credit or debit card.

Decide which forms of payment are best for you. Consider bringing more than one type of payment method, including at least some foreign currency.

• Contact your bank. Ask your bank or card issuer for any information you'll need to know when traveling, such as details about any zero fraud liability protection and the exchange rate that will be used to convert foreign currency to U.S. dollars. Let the customer service representative know when and where you'll be traveling. That way you won't risk having the institution shut down your card or account if it detects a sudden flurry of foreign transactions and can't reach you to verify that the activity is legitimate.
• Plan on using Visa or cash at the Olympics. If you're traveling to Sochi, keep in mind that cash or Visa-branded cards are your only option at Olympic venues.
• Get a card with a chip. If you'll be using a credit, debit, or prepaid debit card, get one that has so-called EMV technology, which consists of a chip with microprocessors used to enhance security and provide other capabilities not possible with traditional magnetic stripe cards. Some foreign merchants, including unmanned kiosks used to pay for tickets, gasoline, tolls, and parking charges, may not accept cards that have only magnetic stripes. The ABA's Feddis says she has had some smaller foreign merchants reject her stripe-only card. Not all U.S.-issued cards currently are available with EMV technology.
• Use banks instead of ATMs. If obtaining cash while traveling, it's generally a good idea to use an English-speaking teller at a bank instead of relying on an ATM. Ask questions about fees, if any, and anything else you need to know about the transaction. If using a credit card to obtain cash, keep in mind that you'll be taking a cash advance, which has no interest-free grace period.
• Avoid foreign transaction fees. If you plan to use a credit or debt card, select one that doesn't charge a foreign transaction fee, which can be 3 percent so, to convert the transaction to U.S. dollars, says Curtis Arnold, founder of CardRatings.com and BestPrepaidDebitCards.com. An increasing number of cards don't impose such fees, including the Bank of America World Travel Card and United MileagePlus cards. You can find more examples at CardRatings.com. Remember that your financial institution will still use an exchange rate to convert foreign currency into U.S. dollars.
• Pay in local currency. Don't bite if a foreign hotel, restaurant, or other merchant offers to let you process a credit card transaction in U.S. dollars instead of in local currency. Having the transaction converted at the point of sale may be more convenient (you'll know exactly how much you'll pay in U.S. dollars). But it may well be more costly than paying in local currency and having the card network convert the transaction to U.S. currency later.
• Set up alerts. If your bank or card issuer has email or text alerts that tell you about account withdrawals or other activity, sign up for them. They may give you an early warning that's something's amiss. Report any problems as soon as possible.
• Write down your account numbers. Keep a list of account and card contact numbers in a separate location. That way if your credit or debit card is stolen or lost, you can report it before too much harm is done.
• Keep receipts. Just as when making a transaction at home, it's important to ask for receipts and keep them where they won't get lost. A receipt may be vital when disputing a charge.
• Review your statements. After returning from your trip, carefully review your checking or credit card statements. Report any unauthorized charges or other problems immediately. If you wait too long, you may lose your right to dispute the charge, and you may increase your liability.
  

— Anthony Giorgianni