I've been thinking about this a lot for the past few years.
Should I be using credit cards when spending overseas?
We don't do much shopping so we generally don't spend like thousands of dollars. So the situation that it's unreasonable to carry loads of cash to buy bags and stuff doesn't really mean much to us. I understand that many people go to Europe to buy their bags and branded goods, and it would be unreasonable to be carrying EUR20,000 in cash so yes, it makes sense that people would use their credit cards.
But when I look at my own situation, we usually spend less than SGD100 per day on average when in a foreign country.
Hotels and flight have all been paid for before we leave. Optimized for credit cards or whatever promos.
So for us, it is possible to be carrying a reasonable amount of foreign currency and maybe top it up with some minimal credit card use IF we are running short on cash during the last few days.
I've been pretty torn about this. Cos, if I charge foreign spending on credit cards, the foreign exchange rates provided by banks are a lot higher than the local or foreign money changers. This could be around 5% higher with or without admin fees. It's hard to estimate cos foreign currency keeps fluctuating and typically we won't track whatever rates the card companies charge us. And I also don't know how much is the admin fees cos it's all in SGD by the time the credit card bill comes and we don't know the actual spread provided by the card company and how much is the admin fee. But I did some rough comparison and concluded that the mark up is around 5%. Maybe a bit less.
So when I think of spending overseas on my card and I think of paying 5% more, it doesn't make sense. Cos here I am trying to get better interest rates on my savings accounts, 2.43% on UOB One account, or getting rebates on my credit cards, 3.33% on my UOB One card, and I'd be making a "loss" when spending 5% more on "charges". And it's not like I don't have a choice. I can spend $100 (worth of SGD) to buy a meal, or I can swipe my card and it would cost $105 for the same meal. Typically, we don't notice this cos we always see the number in the foreign currency, JPY8,000 is always JPY8,000, but there is a REAL cost to the decision.
You'd think it would be a easy decision to make cos why would I want to pay 5% more on my spending when I could spend less by paying cash, since I can. Well, as mentioned in many previous posts, I struggle with hitting my minimum spend on my UOB credit card. If I go overseas for 1 week and stop using my credit card, that expense would be moved to cash, then the card spending would then be lacking, meaning I would need to spend more within that month to push up the spending again. It's the same old issue all over again. Overseas spending would help me easily clear $500 on one card for a 1 week trip.
Just some rough estimates. If I spend $500 overseas on my card, it would mean I get charged an unnecessary $25 in additional expense.
There's no way I would miss out on spending $500 on my UOB card so it's not even an option NOT to spend on the card when I get back to Singapore.
So the question is basically, should I incur $25 to have the convenience of consolidating my spending on my credit card. If I'm ok with the cost, then I get to enjoy the convenience of carrying less cash and when I get back to Singapore, I won't need to stress about how to push up the spending on my credit card.
If I'm not ok with this "convenience fee", then I will need to suffer the inconvenience of carrying cash and have to think about additional spending when I get back.
I have been using my credit card to pay in the previous years. I never noticed the difference cos I always saw the cost of the item in the foreign currency. I never compared the conversion rates between money changer vs credit card until recently.
But after years of mental debate and after seeing the real difference in the cost, I have decided to use cash to pay for my future travel expenses when in the destination country. This is still experimental cos, even though I will be getting savings of 5%, I do not know how much hassle pushing up credit card spending will cause me. Especially these few months when my induced spending has caused me a snowballing difficulty.
Hopefully everything averages out by end of this year.
Edit : A post with example has been added with a light conclusion for myself.
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