So you've decided to travel abroad. Well, that's all fine and dandy. But what form of currency do you plan on using? Cash can vary from country to country and you'll never get your money's worth with exchange rates being what they are. So how do you pay for hotels and airline tickets and souvenirs while abroad? The three most used forms of currency when traveling over seas are credit cards, Bank/ATM cards and traveler's checks. Let's take a look at the benefits and pitfalls of each.

Credit Cards - the New Travelers Checks

Charge or credit cards are getting more and more popular. As a matter of fact, the international popularity of credit cards and the great amount of ATM's all around the world make it easy to go traveling to another country or even continent without ever having to make that annoying trip to the bank to purchase traveler's checks.

Let's take a look at the pros and cons of the credit card as foreign currency:

• Benefit one - Credit cards are multifunctional and accepted at almost every tourist attraction across the globe...in addition to many attractions off the beaten path. (Pitfall - some credit cards "aren't" accepted everywhere so you may be limited to the big hotel chains and thus the higher room rates. Some "Mom and Pop" operations may be off limits to you if you are depending on credit cards).
• Benefit two - Another reason credit cards are gaining in popularity is they give you a much better exchange rate at foreign banks than cash. (Pitfall - that lower exchange rate comes at a high price though at your home bank. The bank will likely cost you a hefty handling fee).

• Benefit three - Traveling around the world with credit cards is very easy, safe and convenient. If the credit cards get stolen or lost or you become a victim of identity theft, you are not liable for more than $50. And sometimes credit card companies will agree to replace your stolen card overnight free of charge while you're traveling abroad if the accident is not your fault. (Pitfall - even though the credit card company will likely overnight you a new card if its stolen...the card was still stolen. A credit card's small size and relative ease to pickpocket makes it a very tempting target for this century's Oliver Twist).
• Benefit four - Credit cards are a wonderful tool to keep record of the purchases you have made. This really helps to maintain your budget and detect fraud by tracking your transactions. (Pitfall - On the other hand, credit cards also give you the ability to pay for impulse purchases without having to worry if you have enough cash on hand.).

• Benefit five - Another option for those traveling abroad are pre-paid credit cards issued by such companies as MasterCard, Visa and American Express. You load as much money as you wish to spend beforehand and shop everywhere MasterCard or Visa is accepted. (Pitfall - these cards are limited by the amount the cardholder loads onto the card)
• And finally, a pitfall without the benefit. Credit cards give you the opportunity and ease to overspend. Be careful or you won't have enough credit left to get back home.

Bank ATM Cards - Benefits and Pitfalls

ATM cards are quickly gaining in popularity behind the credit card. ATM cards can be really the way to go if you are traveling to another country and need to exchange your money for local currency. The exchange rates are usually as good as the ones you get when using a credit card. Usually banks have very favorable wholesale rates available only to them. That is why you can save a nice deal, comparing to the rates that are offered hotels, exchange bureaus and business that accept foreign currency. Moreover, you can use your ATM card wherever MasterCard and Visa are accepted. So you can get cash on weekends or after hours  and get a favorable exchange rate.

But there are risks and pitfalls if you choose the ATM card as your form of currency on your next trip. Of course, using ATM cards is much more secure than traveling with cash, but credit cards and traveler's checks are a better option. So in case your ATM combines credit and ATM card, you should probably think about asking your issuing company to give you a stand-alone ATM card. You should be aware of the fact that if your ATM/credit card gets stolen or lost it does not necessarily have the usual insurance buffer ($50) as a credit card. So if somebody gets a hold of your card you might lose all the money you have on your checking account.

Traveler's Checks - a Credit Card Alternative

Traveler's checks are the old grizzled veteran on the foreign currency market. They've been used by your parents and grandparents for decades. Most U.S. banks sell traveler's checks for a commission of 2 to 5 percent. If you purchase them where you have a bank account, the fee is generally waived.

If you decide to stick with the tried and true, stick with the well-known brands like American Express Traveler's Checks. They come equipped with a counter-counterfeit feature that vendors like. And for the most part, they are recognized in even the remote of regions. Traveler's checks offer much of the same portability, ease and convenience as cash. But if your checks are lost or stolen, they can quickly be replaced. You should keep your traveler's check receipts separate from the actual checks, and keep up with which ones you've used by logging it in your check register. This will provide the information you need to get your checks replaced usually within 24 hours.

Traveler's checks also have a number of disadvantages. Traveler's checks in U.S. dollars can be converted to local cash at banks and most train stations, but they may not be accepted in small towns and rural areas. And even if they are issued in the local currency, many small hotels, shops, and restaurants will not accept them, so you may have to cash them at a bank. Also, when you use traveler's checks, you may get lower exchange rates than if you use a credit or ATM card.

Your Credit Card Decision

Now that you know your options, it's time to make a decision. Do you go with the old grizzled veteran (traveler's checks) or do you go with one of the two new upstarts (credit cards of bank ATM cards). To decide which form of currency will best meet your needs while traveling, consider your individual situation. Think about where you're going and the possibility of finding ATM machines, banks, money exchange offices, vendors or lodgings that take credit cards. If you're embarking on off-the-beaten-path, consider taking cash and traveler's checks. It basically boils down to whatever you feel like is the safest and easiest form of currency to use.

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