Attending an open house is a common step as you shop for your dream home. Of course, it lets you see a property (often after it’s been styled and staged to look its best), which can trigger “I love it!,” “hard pass,” and every possible reaction in between.
But an open house also gives you information beyond just the surface appeal of a home. It can give you clues to structural issues, the level of home maintenance it’s received, and how popular it is with potential buyers. That is, if you know what to look for as you walk through, rather than just admiring some great use of subway tile or a charming farmhouse sink.
Here, learn about what to expect at an open house and how to get the most out of attending one.
Benefits of Attending an Open House
At an open house, a property can be viewed by potential buyers. You can eyeball the house, the street, the neighbors’ places. You might even consider it a homebuyer’s guide to what it’s really like to live somewhere.
There are several benefits to attending an open house as you move through the steps of buying a house. These include:
• You can hone your house-hunting skills by taking detailed notes and comparing them to past and future listings.
• It’s a face-to-face opportunity to make a good impression on the listing agent and ask as many questions as necessary (without having to wait for a reply).
• Sometimes listing photos simply don’t do a house justice. The in-person lighting might be brighter, the hardwood floors shinier, or the primary bedroom larger than it seemed online.
• Similarly, strategically hidden flaws, red flags, and nuances that can only be detected in person are exposed so you (and other potential bidders) can make a truly informed decision.
Some open houses are literally open, meaning they’re posted on a real estate listing or a sign out front and members of the public are allowed to stop by.
In other cases, an open house is available only by appointment and arranged by the seller’s broker.
Typically, the sellers won’t be on the scene at an open house. It’s likely their listing agent will handle the event, guiding potential buyers around the dwelling and answering questions.
There could be other house hunters or visitors (nosy neighbors, perhaps?) attending the open house.
Most homebuyers will be provided with a booklet or pamphlet featuring details about the property, which could include the year it was built, heating and cooling information (oil vs. natural gas, etc.), the square footage, how many bedrooms and bathrooms there are, the size of the lot, types of appliances, and exterior features like decks, porches, pools, and sheds.
From there, house hunters will fill out a sign-in document that records their information for follow-up (unless this was already done in advance) and tour the property. This could occur with the listing agent in tow or by themselves, saving questions for the end.
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Open House Etiquette
Figuring out what to do at an open house isn’t always intuitive, but a crisp, respectful approach can go a long way:
• Bringing along food, drinks, pets, or unruly children could be considered disrespectful and distracting.
• Following the house rules can be crucial, so buyers might be prepared to remove shoes, steer clear of personal property, and ask permission before snapping photos.
• Being polite and personable to the hosting agent can put potential homebuyers in a more favorable light.
• Maintaining a poker face can be helpful during the open house process. If homebuyers spill the beans about how much they love the property, it could make negotiations tougher if and when they make an offer.
If you stay focused and zoom in on details, you can learn a lot during an open house. Perhaps there’s an initially inconspicuous flaw on the exterior of the house or there’s no closet in the fourth bedroom.
• Visible signs of neglect or damage (more on that soon).
• Proximity to the neighbors and whether there’s sufficient privacy. A poke around the premises can also reveal what those new neighbors are like. Do they have a half-built skate park? A forever-barking dog? A chicken coop? A forever-barking dog? A chicken coop?
• Closet and storage space and whether it’s enough to suit your needs.
• What other potential buyers are up to. If they’re in and out quickly or lingering in one area in particular, perhaps it’s an indication of an issue that might have otherwise gone unnoticed.
Potential Red Flags
Aside from standard considerations like the ones above, some red flags to look for at an open house could include:
• An abundance of sweet aromas from candles or air fresheners. This could signal hard-to-fix smells (perhaps caused by mildew or another issue) lurking under the surface.
• Unevenly spaced tiles or crooked electrical outlets, which could signify sloppy DIY renovations that might require costly repairs down the line.
• Issues with the foundation of the house like large gaps, doors that stick, windows with visible cracks, or uneven floors.
• Proximity to water. Checking a FEMA flood map can also help potential buyers know whether there’s the risk of flooding and if flood insurance will be required.
• Signs of lax property maintenance, including faded or chipped paint, leaky faucets, water damage, or overgrown grass and brush. These issues could signify that the owners have neglected other vital home maintenance tasks, which could mean a buyer needs extra funds to cover home repair costs.
• Signs of mold: small black or gray spots in bathroom closets or cabinets, on the ceiling, or around showers, tubs, and faucets.
• Exposed pipes with visible rust or leakage.
• Drafts around windows, doors, and electrical outlets that could be a sign of neglect and a hefty heating bill come winter.
• Stained or warped baseboards (especially in the basement) that could indicate a prior flood. A sump pump can also indicate that flood damage has occurred in the past.
• Cosmetic damage like stains from pets that are strategically hidden by area rugs.
• Condensation or peeling paint around windows, which could signify ventilation problems and moisture issues.
Knowing what to ask is an essential element of attending an open house; it can help you make the most of the experience.
Here are a few key questions homebuyers can ask the selling agent:
• What year was the house built?
• Why is it being sold?
• How long has it been on the market, and were there any asking price fluctuations?
• Are there any offers?
• Are there any problems the seller can disclose about the property? These are issues that could come up in an inspection but are made transparent between the seller and buyer, e.g., health and safety hazards, structural defects, mechanical issues, previous water damage, pests, or renovations.
• Is the property part of a homeowners association? Are there monthly fees associated with it?
• What is the local school system like? How about the neighborhood?
• Is the sewer system handled by the town, or does it run on a private septic tank?
• What fixtures and appliances are part of the purchase: washer/dryer, stove, refrigerator, lighting fixtures, and window treatments?
Next Stop: Buying That Dream Home
After every question has been asked, every surface has been scoured, and every disclosure has been made, it might be time to bid and hopefully snag your new home. Another important step will then be securing a home loan.
With a SoFi Mortgage, you’ll get a competitive rate, flexible terms, and low down-payment options. Plus, our online application process is quick and easy.
SoFi Mortgages: The smart way to secure a home loan.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Buying a home is a major responsibility. If you’re unable to continue paying the mortgage on your house, what happens next? You’ve heard of foreclosure, which can result in losing your home and be financially damaging. But there’s another option called a deed in lieu of foreclosure, which may be less stressful than foreclosure, have less of a negative impact on a credit report, and may be faster to complete.
Note: SoFi does not offer a Deed in Lieu at this time.
Here’s what you need to know about a deed in lieu of foreclosure, and when it might be an option to consider.
What Is a Deed in Lieu of Foreclosure?
Where a foreclosure may involve the court and a lengthy process, the alternative, a deed in lieu of foreclosure, is fairly simple.
If your lender agrees, you hand over the deed to them and the lender releases the lien on the property. You may be released from any balance you owed on the mortgage (however, there may be exceptions if you owe more than the home is worth).
And while a deed in lieu will appear on your credit report, it doesn’t have as severe an impact as a foreclosure.
The lender might even offer you financial assistance to spruce up the home to make it more sellable.
Your lender may only consider a deed in lieu of foreclosure in certain situations.
For instance, the lender might require that you first put your home on the market as a short sale or explore a loan modification.
If you’re completely unable to pay, start by contacting your lender and asking if a deed in lieu of foreclosure is an option. If it is, you’ll be given an application and asked for documents proving your inability to pay the mortgage. The documents will show your income and expenses, as well as bank account balances.
This process can take 30 days or more.
If your application is approved, you may want a real estate lawyer to review it to help you understand whether you are fully released from the financial obligations tied to the mortgage. For example, if the lender sells the home for less than the remaining mortgage balance, are you responsible for that deficiency?
Once you are comfortable with the title-transferring agreement, you and the lender will sign it, and it will be notarized and recorded in public records.
At this point, you will be notified how long you have to leave the home.
When to Consider a Deed in Lieu
One instance when a deed in lieu may be a good idea is if you owe more on your home than it is worth, as long as the agreement stipulates that you won’t owe the difference between the value of the home and what you owe.
If you are unable to continue paying your mortgage, it’s important to know that a foreclosure will leave a nasty mark on your credit report for seven years and make it difficult or impossible for you to take out another mortgage for years.
A deed in lieu will appear on your credit report, but it may not have the same lasting effect. Your credit score will drop, but long term, it may not affect your ability to take out a loan.
Benefits of a Deed in Lieu
There are advantages for both the borrower and the lender when it comes to a deed in lieu. For both, the big benefit is not having to go through the long and expensive process of foreclosure.
Because a deed in lieu is an agreement between you and the lender and not an order from a court, you may have a little more flexibility in terms of when you vacate the property.
With foreclosure, you are sometimes forced to vacate within days by local law enforcement. With a deed in lieu, you may even be able to work out an arrangement where you rent the property back for a period. The lender gets a little rent money and you have more time to figure out your next move.
In addition, this option is more private than a foreclosure.
From the lender’s perspective, the benefits of a deed in lieu include avoiding litigation and court time.
Drawbacks of a Deed in Lieu
There are disadvantages as well. A deed in lieu will appear on your credit report, even if it’s not as damaging as a foreclosure. Plus, it may still be difficult to get another mortgage in subsequent years.
It may still be difficult to get another mortgage in subsequent years.
If you owe more than your home is worth, you may still be on the hook for the difference between the appraised property value and what you owe.
You may be denied a deed in lieu if there are other liens or tax judgments on the property, or if the home is in bad condition and requires maintenance to sell.
The best thing to do, if at all possible, is to avoid getting into a situation where you can’t afford to pay your mortgage. If you’re having short-term financial issues, talk to your lender immediately to see if there is the possibility of delaying a few months’ payment or setting up a loan modification so you can work to pay off your outstanding debt.
Typically, the lender will want to help you; it’s easier to work out an agreement now than several months down the road, when you haven’t paid your mortgage at all and are facing foreclosure.
If you do end up in a situation where you are unable to continue paying your mortgage and you aren’t offered options, consider a deed in lieu of foreclosure as a faster and easier solution than a foreclosure.
If you’re just starting to consider buying a home, create a budget and calculate how much in mortgage payments you can afford each month. Don’t forget to calculate insurance and interest as well. Make sure that you won’t be stretched thin financially.
If you can’t pay your mortgage and you’re unable to get a short sale or loan modification approved, a deed in lieu of foreclosure may be the best option. Rather than go through the foreclosure process, a deed in lieu allows a borrower to sign a property over to the lender.
Your credit will take a significant hit, though not as bad as with a foreclosure.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Maybe you’ve considered refinancing your mortgage, but haven’t quite decided. Is now the right time? Will rates go lower?
It can be hard to know when to take the plunge.
Whether you purchased a home recently or bought a home years ago, you probably know the average mortgage rates now are high compared to the near-historic lows in early 2021.
But as with any financial rate or data point, it is hard—if not impossible—to time the market or predict the future.
Homeowners often look to refinance when it could benefit them in some way, like with a lower monthly payment. Refinancing is the process of paying off a mortgage with new financing, ideally at a lower rate or with some other, more favorable, set of terms.
Here are seven signs that locking in a lower mortgage rate could be the right move.
7 Signs It May Be Smart to Refinance Your Mortgage
1. You Can Break Even Fairly Quickly
Refinancing a mortgage costs money—generally 2% to 5% of the principal amount. So if you are refinancing to save money, you’ll likely want to run numbers to be sure the math checks out.
To calculate the break-even point on a mortgage refinance—when savings exceed costs—do this:
1. Determine your monthly savings by subtracting your projected new monthly mortgage payment from your current monthly payment.
2. Find your tax rate (e.g., 22%) and subtract it from 1 for your after-tax rate.
3. Multiply monthly savings by the after-tax rate. This is your after-tax savings.
4. Take the total fees and closing costs of the new mortgage loan and divide that number by your monthly after-tax savings. This yields the number of months it will take to recover the costs of refinancing—or the break-even point.
For example, if you’re refinancing a $300,000, 30-year mortgage that has a fixed 6% rate to a 4% rate, refinancing will reduce your original monthly payment from $1,799 to $1,432 — a monthly savings of $367. Assuming a tax rate of 22%, the after-tax rate would be 0.78, which results in an after-tax savings of $286.26. If you have $12,000 in refinancing costs, it will take nearly 42 months to recoup the costs of refinancing ($12,000 / $286.26 = 41.9).
The length of time you intend to own the home can affect whether refinancing is worth the expense. You’ll want to run the calculations to make sure that you can break even on a timeline that works for you.
The rate and fees usually work in tandem. The lower the rate, the higher the cost. (“Buying down the rate” means paying an extra fee in the form of discount points. One point costs 1% of the mortgage amount.)
If you’re shopping, each mortgage lender you apply with is required to give you a loan estimate within three days of your application so you can compare terms and annual percentage rates. The APR, which includes the interest rate, points, and lender fees, reflects the true cost of borrowing.
2. You Can Reduce the Rate by at Least 0.5%
You may have heard conflicting ideas about when you should consider refinancing. The reason is that there is no one-size-fits-all answer; individual loan scenarios and goals differ.
One commonly espoused rule of thumb is that the home refinance rate should be a minimum of two percentage points lower than an existing mortgage’s rate. What may work for each individual depends on things like loan amount, interest rate, fees, and more.
However, the combination of larger mortgages and lenders offering lower closing cost options has changed that. For a large mortgage, even a change of 0.5% could result in significant savings, especially if the homeowner can avoid or minimize lender fees.
If rates drop low enough, you might even choose to take a higher rate with a no closing cost refi.
3. You Can Afford to Refinance to a 15-Year Mortgage
When you refinance a loan, you are getting an entirely new loan with new terms. Depending on your eligibility, it is possible to adjust aspects of your loan beyond the interest rate, such as the loan’s term or the type of loan (fixed vs. adjustable).
If you’re looking to save major money over the duration of your mortgage loan, you may want to consider a shorter term, such as 15 years. Shortening the term of your mortgage from 30 years to 15 years will likely cost you more monthly, but it could save thousands in interest over the life of the loan.
For example, a 30-year $1 million loan at a 7.5% interest rate would carry a monthly payment of approximately $6,992 and a total cost of around $1,517,172 over the life of the loan.
Refinancing to a 15-year mortgage with a 5.5% rate would result in a higher monthly payment, about $8,171, but the shorter maturity would result in total loan interest of around $470,750—an interest savings over the life of the loan of about $1,046,422 vs. the 30-year term.
One more perk: Lenders often charge a lower interest rate for a 15-year mortgage than for a 30-year home loan.
4. You’re Interested in Securing a Fixed Rate
Borrowers may take out an adjustable-rate mortgage because they may get a lower rate (at least initially) than on a fixed-rate mortgage for the same property. But just as the name states, the rate will adjust with market fluctuations.
Typically, ARMs for second mortgages such as home equity lines of credit are “pegged” to the prime rate, which generally moves in lockstep with the federal funds rate. First mortgage ARM rates are tied more closely to mortgage-backed securities or the 10-year Treasury note.
Even though ARM loans come with yearly and lifetime interest rate caps, if you believe that interest rates will move higher in the future and you plan to keep your loan for a while, you may want to consider a more stable fixed rate.
Refinancing to a fixed mortgage can protect your loan against rate increases in the future and provide the security of knowing how much you’ll be paying on your mortgage each month—no matter what the markets do.
5. You’re Considering an ARM
You may also be considering a move in the other direction—switching from a fixed-rate mortgage to an adjustable-rate mortgage. This could potentially make sense for someone with a 30-year fixed loan but who plans to leave their home much sooner.
For example, you could get a 7/1 ARM with a potential lower interest rate for the first seven years, and then the rate may change once a year, when up for review, as the market changes. If you plan to move on before higher rate changes, you could potentially save money.
It’s best to know exactly when the rate and payment will adjust, and how high. And it’s important to understand the loan’s margin, index, yearly and lifetime rate caps, and payments. For further details, try using an online mortgage calculator
6. You’re Considering a Strategic Cash-Out Refi
In addition to updating the rate and terms of a mortgage loan, it may be possible to do a cash-out refinance, when you take out a new loan at a higher loan amount by tapping into available equity.
The lender will provide you with cash and in exchange will increase your loan amount, which will likely result in a higher monthly payment.
If you go this route, realize that you’re taking on more debt and using the equity you have built up in your home. Market value changes may result in a loss of home value and equity. Also, a mortgage loan is secured by your home, which means that the lender can seize the property if you are unable to make mortgage payments.
A cash-out refi may make sense if you use it as a tool to pay less interest on your overall debt load. Using the cash from the refinance to pay off debts carrying higher rates, like credit cards, could be a good move.
Depending on loan terms and other factors, a lower rate may allow for overall faster repayment of your other debts.
7. Your Financial Situation Has Improved
When putting together an offer for a mortgage, a lender will often take multiple aspects into consideration. One of those is prevailing interest rates. Another is your financial situation, like your credit history, credit score, income, and debt-to-income ratio.
The better your personal financial situation in the eyes of the lender, the more creditworthy you are—and the better the terms of your loan offer could be.
Therefore, it may be possible to refinance your mortgage loan into better terms if your financial situation has improved since you took out the original loan, especially when paired with relatively low market rates.
Is it time to refinance? It might be if you could get a lower interest rate or better loan term. For instance, locking in a lower rate now may help you achieve your long-term goals by freeing up cash for other stuff, like retirement or a big vacation.
If you decide that refinancing makes sense for you, it’s wise to look for a lender that has competitive rates and flexible terms, like SoFi. Along with a streamlined process, SoFi offers a regular mortgage refinance and a cash-out refinance.
With SoFi, you can choose the right mortgage option for your needs.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
You’ve decided to buy a home. Luckily, you’ve found a real estate agent who can help you find homes to look at and assist with negotiations and inspections. But what if that agent also works for the seller? But what if that person also works for the seller? That is called dual agency, and there’s a lot to consider before agreeing to the arrangement.
Here’s what future homebuyers need to know about dual agency to help decide if it’s the right choice for them.
What Is Dual Agency?
A dual agent represents both the buyer and seller in the same real estate deal. Dual agents are also sometimes referred to as transaction brokers.
Dual agency can be controversial and is banned in eight states: Alaska, Colorado, Florida, Kansas, Maryland, Oklahoma, Texas, Vermont, and Wyoming.
Other states do not explicitly make it illegal, but some do warn against using a dual agent.
For example, the New York Department of State issued a memo advising consumers to be extremely cautious when signing on with a dual agent because in doing so they forfeited their right to an agent’s loyalty.
However, in every state where dual agency is legal, the law requires agents to disclose their work with both the buyer and the seller. Both buyer and seller must agree to use a dual agent and sign a consent form indicating they understand what they are agreeing to.
Dual agency may also refer to deal-making of seller’s agents and buyer’s agents at the same real estate company.
For example, Keller Williams, one of the largest real estate firms in the nation, has both seller’s and buyer’s agents. If one of its seller’s agents puts a home on the market, there’s a decent chance that one of its buyer’s agents may have a client for the property.
This is less controversial and poses fewer issues as it is still two separate people overseeing the seller’s and the buyer’s interests.
Real estate agents are legally bound to represent the best interests of their clients. This means agents are to disclose any information they have that may or may not help their clients in the negotiating phase.
The obligation to disclose could pertain to information on home inspection reports, defects with the house, or anything else that affects the property’s value.
While representing a buyer, an agent must also disclose any existing relationship with the seller.
A seller’s agent must disclose any relationship with potential buyers and all offers made on the property—unless, in general, the seller has instructed his agent in writing to withhold certain kinds of offers.
Real estate agents are also expected to put their clients’ financial best interests above their own. This could mean putting in an offer below asking price, which would reduce their own commission.
With all of that in mind, it becomes clear that issues of loyalty and confidentiality become challenging in a dual agency situation.
Pros of Dual Agency
Smoother communication: Having one agent representing both the buyer and seller could help create a smoother communication path. Because the person represents both parties, they may be able to speed up any negotiations. In this case, the dual agent may also better understand both the seller’s and the buyer’s timelines, their schedules, and any internal deadlines better than two separate parties could. Buyers wouldn’t have to wait for the seller’s agent to call back and sellers wouldn’t have to wait for a buyer’s agent to call back, because with dual agency they are the same person.
Potentially more information on the home: A dual agent may be able to obtain more information on the home than an agent just representing the potential buyer. In turn, they can relay any pertinent information, such as structural issues, inspection reports, and any updates made to the home, to the potential buyer.
Potentially more access to a larger pool of homes: Remember, dual agency also means a buyer’s agent and seller’s agent working for the same agency. That means, if one home doesn’t work out, the two agents could look internally to find more potential homes their agency represents for the would-be buyers. They may even be able to find a few homes that haven’t hit the market yet.
Possibility for a discount on commission: In a typical real estate transaction, the seller’s agent and buyer’s agent split the commission. A dual agent may be willing to negotiate down their commission since they are double-ending the deal.
Dual agents still have to do their job: In the end, even dual agents must present all offers, prepare all paperwork, present all disclosure agreements, and help to complete the deal.
Buyers (and sellers) won’t get special treatment: Agents only working for one side will likely be willing to go all out for their client to ensure that the client gets the best deal. An agent working for both sides may be more tempted to get the best deal for themselves to maximize the commission (hey, it’s just human nature to look out for No. 1). A buyer (and a seller) usually wants loyalty above all else when looking for a home. Homebuyers may want to seek out someone who knows what’s needed to buy a house and has their back.
Buyers (and sellers) may not get the price they want: Again, a dual agent’s allegiances are split down the middle during the deal-making process. A seller’s agent is meant to promote the home and get the seller the best price for the home with the fewest contingencies.
A buyer’s agent is on a mission to find every tiny thing that needs to be fixed with the home to get the buyer the best deal they can. If a person is representing both sides, how can they do both? It’s important to discern an agent’s allegiances before signing on the dotted line.
No pushback from the other agent: In a two-sided real estate deal, the two agents will typically go back and forth on the home’s price, any reductions the buyer may want in exchange for repairs, the home’s inspection report, and much more. This creates a system of checks and balances for both sides, which can be important when negotiating a fair deal. However, if one person is playing both sides, things may get muddled, hurting both the seller and the buyer.
The Takeaway
Dual agency is rare in the real estate world because most buyers and sellers want to find an agent who is loyal to them and has their best interests at heart. Still, if you find yourself in a dual agent situation, there is much to know.
There’s another important decision most homebuyers must make: getting the right home loan. Different lenders may offer different terms, rates, or perks that may fit a buyer best.
SoFi offers mortgage loans with competitive rates, an online application, and mortgage loan officers who can answer your questions.
Simplify the home loan process with SoFi.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
The short answer to the question, “Can I use a credit card in another country?” is yes, you can. The longer answer? Take precautions to ensure you don’t get hit with high foreign transaction fees. You also want to avoid having your card declined because the issuer didn’t know you were traveling and thinks it’s a fraudulent charge.
We’ll review those scenarios and more as we share smart strategies to use your credit card internationally without any hitches or way high fees. Let’s look into:
• Whether you can use your credit card abroad
• How to safely use a credit card overseas
• The cost of using a credit card when traveling
• The pros and cons on using plastic when in another country
• Alternatives to using a credit card when abroad.
Here’s what you need to know.
Can You Use Your Credit Card Abroad?
Whether you’re planning a quick weekend trip to Cabo or going to college abroad, using your credit card can be a super convenient way to pay for day-to-day expenses. It’s also more secure than carrying cash. After all, if you lose paper money, it’s gone… but if you lose your credit card, you can just call the issuer and let them know.
That said, you probably don’t want to rely solely on a single credit card as your only source of funds. Credit cards can be lost or stolen. Additionally, not all vendors will necessarily accept credit cards, and some may not accept the specific type you have. Generally speaking, Visa and MasterCard are more widely accepted than Discover or American Express. Worth noting, though: Both of these latter credit card companies are working hard to increase their overseas presence.
You’ll also want to be aware that many credit cards come with foreign transaction fees that can stack up quickly, even if they appear small. For instance, a 3% foreign transaction fee means that if you put $500 on your credit card during your trip, you’ll spend an additional $15 just for the privilege of using the card. Using a credit card responsibly means being aware of these charges and deciding when and if they are worth it.
Finally, keep in mind that you’ll want to call your card issuer ahead of time to put a travel advisory on the card. That way, they won’t automatically flag a transaction thousands of miles away from home as fraudulent — which could lead to an inconvenient and frustrating declined transaction.
Is It Safe to Use Your Credit Card Abroad?
As long as you’re making purchases from reputable vendors, it is safe to use your credit card abroad. Determining who’s a reputable vendor and who isn’t can be challenging when traveling, and credit card scams can be rampant wherever you go. And it’s always possible, whether you’re traveling or at home, to have your credit card information stolen and used fraudulently. (For example, some criminals steal private information by installing credit-card skimmers on self-service gas pumps.)
How to protect yourself? The best way to ensure your credit card is still secure is to regularly check your transactions and ensure they’re all legitimate. If you see one you don’t recognize, immediately contact your credit card issuer so they can remove the charge and issue you a new card.
Of course, while traveling internationally, it may be difficult to have that new card delivered to you in time to be useful. This is why it’s so important to have some backup funding with you, including some local currency and an additional credit card.
What Are the Costs of Using a Credit Card Overseas?
Using a credit card overseas can get expensive awfully quickly. You may run into hidden costs depending on how you use the credit card. Here are a few to look out for:
• Regular foreign transaction fees These charges are levied by credit card companies simply for your conducting a transaction with a foreign vendor.
• Cash withdrawal fees In some cases, you may be able to use your credit card to access cash money from an ATM. Doing so may incur additional ATM fees on top of the foreign transaction fee. You may even be hit by a third fee from the ATM provider.
• Dynamic currency conversion This is a service that some card issuers offer, which allows you to see what the cost will be in your home currency. Although this can make you feel more secure when it comes to knowing how much something really costs, you may pay for the privilege of seeing that information ahead of time. If you can, choose to have the price listed in the local currency. If you really need to know what that translates to in US dollars (or whatever your home currency is), look it up on your phone. There are plenty of sites and apps that will do the math for you.
• Interest As with any credit card purchase, if you let a revolving balance rack up on your card, you could be subject to expensive interest charges. The best practice is to pay off your card in full, each and every month.
The good news: It’s totally possible to avoid foreign transaction fees by opting for a card that simply doesn’t charge them. You can also skip dynamic currency conversion and decide not to use the card to withdraw cash from an ATM. These moves will help whittle down your fees.
As mentioned above, using credit cards to withdraw cash overseas is possible, but it might not be the smartest option. Along with any foreign transaction fees, you could also be charged cash withdrawal fees, ATM fees, and more.
That said, it is a good idea to have some local currency with you for your journey. So if you aren’t going to use your credit card to withdraw it, what are your options? While ordering foreign currency will almost certainly come at some cost, there are ways to lower the associated fees and save as much as possible.
For example, you may be able to order foreign currency from your regular domestic bank, which could come with fewer charges than withdrawing from an overseas ATM using a credit card. You may also see currency exchange services available at the airport, but these can be pricey in their own right.
Another good option: Withdraw money from a foreign ATM — but using the right kind of card. Some banks offer debit or prepaid cards with no foreign transaction fees, and may even throw in ATM fee reimbursement so you truly don’t have to worry about any additional fees. Of course, you’ll have to put in the effort ahead of time to ensure your bank offers a product like this or even to open a new bank account for this purpose.
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Is It Better to Pay and Withdraw Money in Local Currency?
As mentioned above, one of the costliest parts of overseas travel is dynamic currency conversion — the service that lets you choose to pay in your own currency at a point-of-sale transaction. Dynamic currency conversion comes at an additional cost, and that’s not counting any other foreign transaction fees you might be hit with.
All of which is to say: If you can, paying in local currency is almost always the better option. (And, of course, with cash, you won’t face any additional charges other than what you already paid to acquire the currency.)
Pros and Cons of Using a Credit Card Overseas
As with any financial decision, using a credit card overseas has both pros and cons to consider. Here are a few to mull over.
Pros of using a credit card overseas:
• More secure than cash, which can be easily lost
• Easy to use and less bulky than carrying around bills and coins
• Some cards offer special travel perks, such as the ability to earn miles as a reward, which can make travel easier and cheaper
Now, let’s look at the other side: the cons of using a credit card when you travel outside the U.S.
• Can come with costly foreign transaction fees, some of which may be hidden
• Not all overseas vendors accept credit cards (or all types of credit cards)
• Could be declined if you don’t put a travel advisory on your card
For those who like an at-a-glance approach to seeing the benefits and downsides, take a look at this chart summarizing both sides of charging purchases with a credit card when on foreign soil:
Pros
Cons
More secure than cash
May trigger costly foreign transaction
Easy to use and less bulky to carry
Not all overseas vendors accept credit cards
May offer special travel perks, like earning travel miles
Could be declined if you don’t add a travel advisory to your account
Alternatives to Using Credit Cards
If you decide you don’t want to use credit cards overseas, you can always rely on cash. Ideally, though, you’ll also want to carry a debit card connected to your checking account that allows you to access more cash in case you overrun your original budget or need money in an emergency.
You may also be able to pay for certain goods and services using an online P2P payment system like PayPal or Venmo, or purchase gift cards for specific vendors ahead of time.
Although they’re slightly outdated, traveler’s checks are still available, though relatively rare compared to their heyday. They offer another relatively secure way to pay for goods and services overseas.
Tips for When You Travel With a Credit Card
For the best success when traveling with a credit card, follow these tips:
• Choose a card that’s widely accepted worldwide.
• Shop around for a card that doesn’t assess foreign transaction fees.
• Call your card issuer ahead of time to tell them you’ll be traveling. This will help you avoid having a transaction declined while you’re abroad.
• It’s a good idea to travel with some backup funds, whether that means cash, a foreign-transaction-fee-free debit card, or another credit card.
The Takeaway
Whether you’re studying abroad or just enjoying a foreign getaway, it’s possible to use a credit card in another country. Yet, if you’re not careful, you may run into costly foreign transaction fees that can stack up fast. It’s a good idea to do your homework ahead of time to avoid any billing-statement sticker shock or regret. With a little planning, you can enjoy your travels without the cloud of growing credit-card debt hanging over your head.
Looking for a bank that doesn’t charge foreign transaction fees? SoFi has you covered, wherever you are. Sign up with direct deposit, and you’ll get both Checking and Savings accounts with one easy application. Better yet, you can earn a competitive APY.
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FAQ
How do I pay internationally with a credit card?
The same way you do at home: You might swipe, dip, or tap the card at the point of sale. Use a card that doesn’t charge foreign transaction fees to minimize charges as you travel.
Is it better to use a debit or credit card abroad?
Whichever option offers lower — ideally, zero — foreign transaction fees is the best bet. Keep in mind that withdrawing money from an ATM using a credit card can be a very expensive option for acquiring foreign currency.
Can I withdraw money from my credit card abroad?
You can, but that doesn’t necessarily mean you should. Many credit cards charge foreign transaction fees as well as cash withdrawal fees that can really add up. Look for a bank account that offers a no-foreign-transaction-fee debit card, or order foreign currency ahead of time from your local bank.
Photo credit: iStock/martin-dm
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