Should you use cash or credit card when travelling overseas?

You wish to avoid the risks associated with carrying too much cash when overseas, yet would not want to incur extra charges on your credit card at the same time? Let us guide you on the advantages and disadvantages of using cash and credit card when you are overseas.

Cash is still king?

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Benefits of using cash overseas:

The most obvious benefit of cash is in the in-your-pocket convenience. Depending on the countries you plan to visit on your next trip, you may realize that not every stop along the way accept payment via credit cards. Using cash for small daily expenses such as food and cheap items may make more sense, since the amount is small. If you only spend the cash you have, you will not carry a balance nor pay interests on purchases. You can also avoid ATM fees and save time from your trip hunting down the nearest ATM. Using cash also makes budgeting easier.

Travelling to China?

China is now the biggest cashless marketplace. Mobile Pay is growing so rapidly in mainland China that as a foreigner, we find it increasingly difficult to complete transactions without it. As of 2017, Weixin and Wechat have a combined monthly active user base of 938 million users. At the end of 2016, Tencent’s active mobile payment accounts and daily payment transaction volume both exceeded 600 million. Based on Ipsos’ study on WeChat Pay data and an online survey of 6,595 respondents, as of 2017, 40% of Chinese regularly carry less than 100RMB cash, and 52% of Chinese use cash for only 20% or less of their monthly consumption. What are the current cashless payments in China?

  • Union Pay Credit Card

China Union Pay (CUP) is the most widely available credit card payment network in China. Cards from Union Pay may include contactless payment technology, known as QuickPass. Many merchants in China still do not accept Visa or Mastercard. Singaporeans now have the option to withdraw money directly from their accounts globally without incurring any charges, by applying for DBS UnionPay Platinum Debit Card. There is also a credit card option from UOB called the UOB UnionPay Card.

  • Apple Pay

Apple Pay launched in 2016, in a market dominated by competing mobile payments WeChat Wallet and AliPay. It should work at any store with NFC POS systems with a QuickPass sticker on it. Apple’s website has a list of merchant partners that currently support ApplePay, such as Starbucks, MacDonald’s, H&M, Watsons, 7-11 and more.

  • Alipay

In China, Alipay is as good as cash. Like WeChat Pay, Alipay users need to have a China banking account for debiting transactions or a China bank-issued credit card. Alipay charges no transaction fees and requires customers to indicate that they are satisfied with the quality of goods or services received before payment is processed.

  • WeChat Pay

In 2017 Tencent reported that WeChat had overtaken Alibaba with 600 million active WeChat mobile payment users versus 450 million for Alibaba’s Alipay.

As a foreigner in China, there is no way to directly transfer funds into your WeChat account unless you have a way to open a China based bank account, which usually requires working in China or paying a large deposit.

Disadvantages of using cash overseas:

Travellers carrying large amount of cash might prone to getting targeted by thieves, especially if they know that you are a tourist. Losing your cash can also make it hard for you to claim on your insurance, since there is no proof on how much you had with you at the time when it was stolen or lost. Many insurance companies also place a maximum cap on how much you can claim on stolen or lost cash, and that cap amount can be way less than the actual amount that you lost. The process of claiming lost cash from insurance companies can be a long and cumbersome process.

If you are going to to visit multiple countries and plan to exchange Singapore dollars at each new arrival, you may find that low exchange rates at local money changers can cost you a lot each time.


Should you use credit card overseas?

There are many signs that the world is moving towards a cashless economy. From Kenya to London to Shanghai, the ability to make contactless payments with credit cards, phones and watches is hastening the long-predicted death of coins and paper bills.

Advantages of using credit card overseas

Despite the transaction fees, banks often tangle attractive cashbacks for using credit cards abroad. These cashbacks can sometimes more than offset the transaction fees involved.

Credit cards typically charge 2.5% to 3.5% for overseas transactions in a different currency. These transaction fees are usually lower than the merchant’s exchange rate. Hence, it makes sense to charge your purchases in a foreign currency when abroad and use the credit card’s exchange rate instead of the merchant’s exchange rate. As a general rule of the thumb, MasterCards and Visa Cards have similar transaction fees while American Express Cards have the highest transaction fees.

Foreign Currency Exchange Fees (as of 21 December 2017)

Amex 2.5%

BOC 2.5% (Visa/Masters), 2.1% (Union Pay), except 0% when using dual currency diamond card for RMB

CIMB (from 1st Feb 2018) 3% (2% bank admin fee reimbursed for CIMB visa signature and CIMB Platinum Mastercard)

Citibank 2.8% (Visa/Masters), 3.3% (Amex)

DBS/POSB 2.8% (Visa/Masters), 3% (Amex)

Diners 2.5%

HSBC 2.5%

ICBC 2.5% (except 0% when using visa dual currency card for USD or using Union Pay dual currency card for RMB)

Maybank 2.5%, except Maybank Visa Infinite, Visa Dianmante, and World Mastercard 2.75%

OCBC 2.8%

Standard Chartered 3.5%

UOB 2.8% (Visa/Masters/JCB/Union Pay), 3.25% (Amex), except UOB PRVI Miles Visa/Masters 3.25%

Disadvantages of using credit cards overseas:

Shoppers tend to spend more when using credit card, as it is harder to keep track of spending as compared to using cash. Conversion fees and admin fees apply when using credit card overseas. Conversion fees refer to the conversion of the foreign currency to Singapore dollars. If you are paying in non USD, banks tend to convert the foreign currency into US dollars and then convert that to Singapore dollars. Which means you could be possibly paying slightly more than you originally thought. Admin fees are also known as the foreign currency transaction, when banks allow you to use the card overseas.