Debit cards can be used abroad in the same way that they are used in Australia, but there are some important differences that should be understood.
Debit cards are processed in the same way as credit cards, with the important difference that where a credit card accesses its own separate account, a debit card accesses an associated bank transaction account. Any overseas merchant displaying the Visa or MasterCard decals on the door or near the register will accept debit cards branded by these credit card companies, making them more widely accepted than cheques drawn on an Australian account and more convenient than exchanging currencies.
When a debit card is used for a transaction, the associated bank account is charged in Australian dollars, while the merchant’s account is credited with an equal amount of the local currency. This negates the need to carry currency, which saves on bureau de change fees and is far safer, as debit cards are easier to conceal and if stolen can be quickly cancelled and replaced.
Zero liability guarantees apply to transactions abroad, ensuring the debit card will not be charged for unauthorised transactions, and this can provide peace of mind for overseas spending. A zero liability guarantee does depend on whether the user informs the debit card provider in good time of the fraudulent transaction as well as not having contributed to the fraud by, for example, lending out the debit card to someone else or writing the PIN number on the card’s sleeve.
Cross-currency transactions may be charged a foreign currency transaction fee. This is usually a percentage of the transaction amount, although minimum amounts are often applicable, which can make buying a small item uneconomic. A traveller should be mindful of their foreign currency transaction fee’s amount, and frequent travellers may wish to locate a debit card that does not charge such fees.
Another good idea for frequent travellers is a prepaid debit card. These cards can be purchased in Australia prior to the flight, pre-loaded with a certain amount of foreign currency. The exchange rate is usually competitive and no foreign currency transaction charge should be applicable.
