Credit card travel disaster protection?

Safety in numbers, we're always taught. It's smarter to go out late at night with someone accompanying you than to make your way alone, and those who hike in the rugged wilderness without a companion could wind up like that guy in "127 Hours." Some personal finance and travel experts offer a similar take on traveling in foreign lands with credit cards. You're better off with them than without them.

Not that you shouldn't bring along some cash. If you don't, that could be problematic as well. "You can't go to the souk in Istanbul with a credit card. You've got to pay with cash," says David Litman, CEO of GetaRoom.com, a hotel booking site that specializes in finding low rates. "There are people you will have to tip, and that's generally going to be with cash. You have to have a mix, but everything I can put on a credit card, I do."

Think this is overplaying the idea that traveling without a credit card could invite disaster? Consider the following:

  1. If your cash and cards are lost or stolen, only credit cards can be replaced immediately. For example, if your hotel room is broken into and your cards are stolen, your first call should be to the local authorities. Then, you'll want to call the issuing bank to notify them of the theft. The best credit card companies will send you a replacement immediately and make sure you're financially set to continue your journey or return home. That's a part of their customer service.

    With a debit card, as long as you call your bank within two business days, even if your checking account was cleaned out, you should eventually get all of your money back, except possibly the first $50. But you likely won't see it until the next business day, which could mean begging the American embassy to put you up for a night.

    And if you only brought cash, and that's what was stolen, then keep your fingers crossed that the authorities rival their fictional counterparts on "Law & Order" or "Hawaii Five-O." Then, just maybe, you won't have to beg your family members to wire you enough money to get back home.

  2. If you become sick, a credit card can speed your treatment. Sure, it's unlikely, but Litman throws out a pretty terrifying scenario: "Let's say you're in Zimbabwe, and you come down with dysentery, and you need $20,000 for a private aircraft to take you to another country where you can get better treatment," says Litman. "If your limit is $10,000, and you need your credit raised, and you explain what's going on, and can fax over a doctor's certificate, they'll give you that."

    That's a lot of hypotheticals, and the outcome would depend on your relationship with your credit card issuer--we can imagine situations where you're still out of luck--but his point is well taken. If you're stuck in another country with a desperate need for money, your odds of getting some quickly are a heck of a lot better with your credit card issuer than with your debit card's bank or having to wait for your relatives to collect and wire over some funds.

  3. Credit card exchange rates won't drain your budget as fast. True, many credit cards charge a foreign transaction fee for purchases (not all: Capital One is free of them, and certain cards from Chase, Citi and American Express have removed the foreign transaction fee), but even then it's usually cheaper to pay the fee than to convert your American dollars or traveler's checks into foreign currency.

    Why is it cheaper? "Credit card purchases are exchanged at the interbank exchange rate, usually the best rate one can get for currency exchange," says Howard Dvorkin, founder of the nonprofit Consolidating Credit Counseling Services, Inc.

  4. Credit cards won't accidentally pay the wrong amount. Think about the scenarios that might happen if you wouldn't know a rupee or a peso if a Brink's truck full of them crashed into you. "If you're not familiar with the currency, it's so easy to put down the wrong bill," Litman says. "I've seen that happen, and while most people are honest, some are not."

    Speaking of dishonest people, most major credit cards offer purchase protection. Whether that protection covers purchases made outside the U.S. depends on your issuer and your relationship with the issuer. But it's just another reason many people swear by credit cards for all their shopping at home and abroad.

  5. Credit cards make it easy to rent a car, secure a hotel room and book a flight. A lot of people love traveling with credit cards due to travel perks--the best credit cards, for instance, will let you collect frequent flyer miles. But, sure, if you aren't one of those people, a debit card will get you a flight just fine whereas paying for an airline ticket with cash can be problematic--and even cause suspicion from an airline. In this post 9/11-era, do you really want that?

    And paying for a hotel room and a rental car with a debit card can be even trickier. You may come through perfectly OK, but you'll want to call ahead if you can, to make sure that the rental car company accepts debit cards. Then you'll want to ask if they'll make you pay a deposit for renting a car . Some companies will tack on an extra two, three hundred or more dollars that won't be available in your checking account until you return the car.

    Some hotels may let you hold the room with a debit card but then turn you away at the desk because you plan on paying with that debit card. Or they may let you pay with the debit card, but add on one of those holds of several hundred dollars.

    And given that it can be hard enough to stay in a hotel and use a rental car in America with a debit card, you can imagine how things might go in another country if you have a language barrier to overcome as well.

In the end, is it possible to travel abroad and be just fine without credit cards? Of course. But credit cards are arguably the best insurance travelers have that their photo album isn't filled with pictures of the family sleeping on a park bench next to the London Underground.