Should you keep your credit card if you're moving abroad?
The Department of State estimates that somewhere between 3 to 8 million Americans live abroad 鈥� whether temporarily or permanently. Some people may move overseas in pursuit of a job, relocate after retirement, or simply go on an extended vacation. Given that roughly 71% of Americans have at least one credit card, many of these expats are likely faced with the choice of keeping or cancelling their card before leaving. Their decision needs to be based on a number of factors, which we go over in depth below.
Consider Foreign Transaction Fees
The chief factor in deciding whether you should keep your credit card before moving abroad is its foreign transaction fee. Many credit cards in the United States charge their users a 3% fee whenever a transaction passes through a foreign bank. It doesn鈥檛 make any sense to take a credit card with you to a foreign country if every purchase you make will come attached with this type of fee. No matter how many rewards you may earn for your purchases, you are unlikely to recoup all the charges you would end up paying. In such a scenario, you'd end up with a net loss.
You can check whether your card charges聽聽under the 鈥渢ransactions鈥� part of your cardmember agreement. Some聽聽waive this fee, and would be suitable for use abroad.
Consider the Impact on Your Credit Score
Don鈥檛 cancel a credit card account unless it鈥檚 having a negative impact on your finances. Assuming you aren鈥檛 paying any maintenance or annual fees, it鈥檚 better to leave an account open than to close it. This is because part of what determines your FICO 8 score, the most popular score in card lending, is the average age of your accounts. Closing an old credit card can result in the average age decreasing, thus negatively impacting your score.
Your score will eventually bounce back, so it is not worth paying an annual fee just to keep your account alive (in most cases). Also, those people who don鈥檛 plan on returning to the United States may have little regard for聽. They do not apply in other countries, such as England. There, you will be judged based on your payment history for accounts with the country鈥檚 own financial institutions.
Consider the Rewards
While the rewards rate for U.S. credit cards are among the best in the world, some do have better offers. For example, the聽聽blow U.S. deals out of the water. Therefore, if you鈥檙e moving to a country like Singapore you may prefer to cancel your old credit card, and get one with higher rewards 鈥� it will maximize your savings opportunity. Before you move, take the time to scope out the credit card rewards market in your new home. It may not seem like much at first glance, but a 1-2 percentage point difference in rewards rate will mean a significant change in total savings in the long-run.
Consider the Chip Technology
Outside of a few exceptions, most credit cards in the United States come equipped with chip and signature EMV technology. This is not the standard accepted worldwide. Many countries throughout the world, particularly in Europe, operate on so-called chip & pin technology. What does this mean for you? While, chip and signature cards will work at most establishments, including ones that take chip & pin, they may not with certain unmanned terminals. For example, unmanned ticketing terminals may require your card to be set up with a pin. Be aware of these restrictions before expecting you can simply use your old card when you move.
This article first appeared in .听
