If you’re planning on traveling, you’ll be glad to know that your 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 before getting on your next plane overseas.

Funnily enough, debit cards are processed pretty much in the same way as credit cards. The main important difference is that where a credit card accesses its own separate account, a debit card accesses an associated bank transaction account. So the good news is that any overseas merchant displaying the Visa or MasterCard stickers on the door or near the register will accept debit cards branded by these credit card companies, making them widely accepted.

How the process works

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. But as we all know, not all currencies are created equal. $10AUD is not equal to USD$10 or even $10NZD. This is where the currency conversion and foreign transaction fees comes into play. You essentially pay the bank for converting the currency behind the scenes. You should check with your bank or card issuer what fees they charge for using your debit card abroad, and compare them with other options such as cash or credit cards.

More importantly, you should also be aware of the exchange rates that apply to your transactions, and avoid dynamic currency conversion (DCC). DCC is when a merchant or ATM offers to convert the transaction amount to your home currency at a higher rate than the market rate. This is usually a percentage of the transaction amount, although minimum amounts are often applicable, which can make buying a small item uneconomic. If you’re a frequent traveller you will probably want to look for a debit card that does not charge such fees.

How the protect your money

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.

Another handy tip is to call your bank or provider before you go overseas to let them know what countries you’ll be in. If you suddenly start using your debit card in Canada and your bank thinks you live in Australia, their fraud team could put a hold on your card. This would add a major inconvenience to your trip. If you let them know you’re off jet-setting the globe, they will know that the transaction is legitimate and not block your account.

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.

Using your debit card abroad can be a convenient and safe way to pay for things or access cash when traveling. However, you should be aware of the potential fees and risks involved, and take some steps to prepare and protect yourself.