Should you keep your credit card if you're moving abroad?

The chief factor in deciding whether you should keep your credit card before moving out of the country is its foreign transaction fee. 

Patrick Semansky/AP/File
Credit and debit cards are displayed for a photographer in Baltimore.

The Department of State estimates that somewhere between 3 to 8 million Americans live abroad – 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’t 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 foreign transaction fees under the “transactions” part of your cardmember agreement. Some travel rewards credit cards waive this fee, and would be suitable for use abroad.

Consider the Impact on Your Credit Score

Don’t cancel a credit card account unless it’s having a negative impact on your finances. Assuming you aren’t paying any maintenance or annual fees, it’s 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’t plan on returning to the United States may have little regard for U.S. credit scores. 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’s 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 top credit cards in Singapore blow U.S. deals out of the water. Therefore, if you’re moving to a country like Singapore you may prefer to cancel your old credit card, and get one with higher rewards – 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 ValuePenguin

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