Why might travelers incur higher costs when using credit cards abroad compared to cash?

Travelers may incur higher costs when using credit cards abroad primarily due to the timing of foreign exchange rates. When a charge is made in a foreign currency, the exchange rate applied may not be the current market rate at the time of the transaction. Instead, the rate is often determined when the transaction is processed, which can be hours or even days later. During this time, the foreign exchange market may fluctuate, and if the rate goes up, travelers could end up paying more when the transaction completes. This delay can lead to unexpected costs that travelers may not account for when using a credit card overseas, making it crucial for them to understand how their credit card provider handles foreign transactions.

Other factors, such as interest rates, annual fees, and handling fees, can affect overall costs but are typically consistent regardless of where the purchase is made, and they don't directly relate to the timing discrepancies of currency conversion that impact the costs specifically associated with credit card use abroad.