Debit or Credit: Which Way Should Students Pay Overseas

Debit or Credit Card

In just a few months, spring semester will be over, and you’ll be on your way to your summer study abroad trip in Japan or the U.K. or Costa Rica. You’ve been preparing for months already ― researching the climate, the culture, the cuisine ― and you already feel like a travel pro.

However, if this is your first trip overseas, you might not have considered how you are going to pay for all your adventures in that foreign land. After all, even if your program pays for your lodgings and meals, you will undoubtedly want to explore on your own, and to do that, you’ll have to pay up. Experienced travelers rarely move about with more than a few bucks of cash, preferring hard, shiny plastic instead. Yet, if you only have a debt or ATM card in your pocket, you might want to consider taking out a line of credit, instead.

Debit cards are incredibly insecure, especially overseas, and traveling with one could cause all sorts of problems ― most significantly: theft. Here is a quick comparison of the different types of plastic payment to help you decide what stays and what goes.

Credit Cards Have New Security, and Debit Cards Lack the Best Tech

Last year, the major credit card companies (including Visa, MasterCard, and American Express) called for Americans to make a move away from the traditional magnetic strip and toward computer chips. Called EMV cards (for Europay, MasterCard, and Visa), these chip-embedded cards are dramatically more secure than magstrips ever were, and therefore they are more cost-effective for credit companies, card issuers, merchants, cardholders, and more. As a result, credit card companies provided issuers and merchants all sorts of incentives to adopt EMV technology ― and most of them have.

The chips contain tons of payment information, just like magstrips, but that data is heavily encrypted and difficult to reproduce on another card. Conversely, magstrips are easy to skim information from at any payment terminal, and fraudsters need only to print another magnetic strip to start spending their ill-gotten gains.

Nearly all credit cards in the country now use chips; in fact, nearly all credit cards in the world rely on EMV, since Europe and Asia adopted the tech nearly a decade ago. However, in the U.S. at least, debit cards still rely on old magstrips to convey data. Because no incentives exist to encourage banks to provide chip-embedded debit options, your debit card remains easy to steal from, especially when you travel abroad. Worse, thieves can take as much as they want, as explained next.

Credit Cards Have Automatic Limits, and Debit Cards Have No Protection

When you apply for a credit card, the issuer evaluates your credit history (which is likely lacking when you are young) to decide how much money you can be trusted with, called your credit limit. Usually, college students can get limits between $500 and $1,500, which is plenty to use on your summer study abroad trip. Fortunately, whatever your determined limit, no matter how hard you try, you cannot spend higher than that amount ― which means thieves cannot spend higher than that amount either.

Conversely, your debit card is directly linked to your checking account, which is usually linked to your savings account. A scammer who gets access to your debit card information ― through hacking, skimming, or plain-and-simple theft ― has access to all of your money. An experienced crook will drain a debit card in minutes, leaving you little time to notify your financial institution and cancel the card. Though your bank can investigate claims of unauthorized activity, it takes months to resolve; meanwhile, you are out your life savings while you are in a foreign country.

Credit Cards Provide Crazy Travel Benefits and Debit Cards Incur Crazy Fees

Finally, many credit cards give you rewards on travel-related purchases, like plane tickets or hotel rooms, so you can explore the world for less. Usually, travel rewards cards have higher interest rates than regular credit cards, but as long as you use credit responsibly ― i.e. never spend more than 15 percent of your limit and pay your total balance every month ― you should never incur unmanageable debts.

Meanwhile, debit cards tend to punish you for traveling overseas. Because it costs extra to send information internationally, banks charge transaction fees that add up fast. Additionally, every visit to an out-of-country ATM can cost as much as $10, putting your trip well over-budget. Instead of factoring in the costs of fees, you should just start building your credit with a safe, secure, satisfying credit card for your summer studies.