A credit card can be a blessing or a bane, depending on how one uses it. It is capable of both improving and degrading your credit score. While international credit cards provide great functionality in terms of travelling and making international transactions, they can also prove to be risky if not managed properly.
These risks can include several things. A very common credit card risk in India is credit card fraud. Additionally, you could incur high transaction fees on your international credit card abroad. And the most obvious ones include overspending, paying high-interest rates, and a hit on credit score on non-repayment of dues. So let us learn 5 ways to successfully manage an international credit card.
Avoid foreign transaction fees
A large number of credit cards charge a foreign transaction fee on purchases made outside the user’s home country. This fee could vary ranging from 2-4%, depending on the credit card company.
Some of the best credit cards come with no foreign transaction fees. When getting yourself an international credit card, look for one that doesn’t have any foreign transaction fees. You will end up saving a lot of money on your travels abroad.
Avoid dynamic currency conversion
Dynamic currency conversion is feature credit cards provide for international travellers. With this, you can conduct a transaction in Indian rupees instead of the local currency of the country you’re visiting.
This saves you the trouble of converting the cost of things in your home currency to get an idea of what it will cost you. While this is convenient for a traveller, they end up paying more.
Credit card companies generally use a higher dynamic currency conversion exchange rate when they convert the purchase in your currency. So it’s best to avoid dynamic currency conversion and convert the currency yourself.
Avoid running into frauds
The first step to credit card safety is to block international transactions on your credit card if you’re not a frequent international traveller. Nevertheless, blocking transactions is inevitable when you lose your credit card, or if there’s an attempt by fraudsters to make unauthorized transactions.
Now, if you do use your credit card for international transactions, you can set a credit sublimit for international and domestic transactions. You can not only set monthly limits for transactions, but also daily limits on your credit card, based on your usage. These limits prevent unauthorized transactions from taking place through your credit card.
You can manage credit card limits and block international transactions from your bank’s website or app. Additionally, you should always be aware of divulging your credit card details to tele-callers, strangers or someone you don’t trust.
Credit cards can prove to be risky financial instruments for people who find it hard to control the tendency to spend more than they can afford. This is especially true for international credit card, as it opens up the possibilities to spend money manifold.
The availability of credit absorbs the hit of making large payments, and hence people are motivated to buy more. Besides, credit card companies encourage you to buy more by offering rewards on your purchases.
The best way to manage a credit card is to observe strict financial discipline. You should check your outstanding credit card amount on a regular basis to check your spending patterns. You should spend only when you have to, while sticking to your budget. Moreover, encashing the reward points every 1-2 years is a good idea, instead of accumulating them for a long time.
Avoid degradation of credit score
Coming to the most important aspect of managing your international credit card, there are several ways to avoid a hit to your credit score. Defaults in repayments or even late payments reduce your credit score.
Secondly, a high credit utilisation ratio also has a negative impact on the credit score. Put simply, using a large portion of your available credit limit reduces your credit score. As a rule of thumb, a credit utilisation ratio higher than 30–40% is considered high.
On frequently going above this limit, your credit score will take a hit. So other than controlling your credit card expenses, you can use more than one credit card so you can divide your spending amongst them.
These are the ways in which you can successfully manage your international credit cards without running into trouble. Following these tips will not only avoid risks, but it will also improve your credit score by helping you maintain a healthy credit history. So, get your international credit card, and ensure that you use it judiciously.