When you go on holiday the last thing you want to worry about is whether you’re getting the best exchange rate or using the best payment type, which is why it’s vital to do your research before you go. Most people know that it is advisable to use a credit card when you go abroad, but how do you know which one of the many to choose?
Let’s start with looking at the benefits of using a credit card abroad. Firstly, you will have the peace of mind that should you inadvertently use a dodgy ATM or have your card stolen, your credit card provider will protect you. Chances are they will have already contacted you to alert you to unusual activity on your account; they are pretty hot at noticing these things! Secondly, any purchases you make over £100 are covered under Section 75 of the Consumer Credit Act, so if they turn out to be damaged or faulty, you are entitled to full compensation from either the merchant or your credit card provider. It’s not all good news though, as many credit cards charge a foreign transaction fee when the card is used outside of the UK and this can be up to 3%, which soon mounts up if it is used over the course of a week or two week holiday. Thankfully, there are specific travel credit cards out there, which are designed to be used abroad and don’t have any fees associated with them. Nerys Lewis, head of credit cards at Confused.com, advises that “Holidaymakers could make significant savings with a travel card, especially if you go away frequently. So it’s worth comparing deals to see which one is most suited to you”. It’s also worth noting that some of these cards also offer special deals for example, no extra fees on overseas cash withdrawals.
Here are some of the best travel credit cards currently available:
The Post Office Platinum credit card is great as not only does it not charge you for using it overseas but it also has the added bonus of not charging you if you make any online transaction in a foreign currency. The card is provided by the Bank of Ireland UK and offers 0% interest on any balance transfers you make for the first 18 months as well as 0% interest for three months on any purchases you make on it. What you do have to be careful of though, is that after these introductory periods the interest will revert back to a representative APR based on your circumstances, which is generally at least 17.8%. Another benefit to using this credit card is that you won’t be charged commission when you buy foreign currency from the Post Office; either online or in one of its branches. In order to qualify for this card you must also be earning over £8,000 a year
If you are aged 50 or over then this is one of the best available travel cards for you. This credit card offers 0% interest on foreign currency fees as well as on purchases and balance transfers within the first 9 months. After this time, the standard rate rises to a competitive 11.9%. If you decide to use the Saga Platinum credit card to take out money from an ATM abroad you will also have 55 days of 0% interest. But beware, because if you don’t pay the balance off within this period, you will be charged a whopping 23.9% from the date at which you originally withdrew the money.
As is the case with most travel credit cards, the Halifax Clarity credit card also doesn’t charge foreign exchange fees when you use it to pay for purchase abroad. However, in addition this card will also not charge you to withdraw cash from an ATM when you are in a foreign country. You must ensure you pay the balance off in full the moment you get home though, as you will be charged interest on it from the date of withdrawal. The representative APR is only 12.9%, but this will depend on your personal circumstances.
The Nationwide credit card comes with loads of added extras, which we always like. Firstly, as a cardholder you will automatically be placed into their ‘Rewards for Abroad’ scheme, which means every time you make a purchase in pounds sterling, you will earn a commission-free foreign allowance. To clarify, if you were to spend £100 on shopping in a month, Nationwide will reward you with £20 worth of commission-free allowance to use on purchases in a foreign currency, not bad eh? There is no limit to how much of this allowance you can build up and the total amount earned will appear on your statement each month. If you don’t spend your allowance amount in the first year you can also carry it over, so you don’t lose it. But, just be careful, because if you spend over your allowance you will be charged a 2% commission fee on the extra purchase amount. To be entitled to this card you must already own a FlexDirect or a FlexPlus account with Nationwide, but you are not allowed to transfer a balance across from an existing Nationwide credit card. This card will also give you 15 months worth of 0% interest, but when that time period ends the APR will be around 17.9%, circumstances dependent.
The good thing about the Aqua Advance credit card is that if your credit score is far from perfect, it will still be available to you and will help improve your score in future. Although the rate of interest is pretty high at 34.9%, if you manage to keep within your credit limit and repay on time, the interest rate can drop to 19.9% APR (variable). As with all credit cards, always ensure you pay off the bill in full when you return from your holiday. This credit card will also not charge you for using it on purchases made overseas, but it will charge you an ATM fee if you withdraw cash on it. As a bonus, you will receive SMS alerts every time you use it abroad, which is a great additional security feature.
And finally, the Lloyds credit card. Although you have to pay an annual fee of £24 just to have the privilege of owning this card, there are definite perks to be had. When you spend over £7,000 a year on the card, you are automatically upgraded to Business Class on any flights you book and pay for. You will also receive double the amount of Avios points for the first six months that you use your Lloyds Bank Avios Rewards American Express card. You cannot, however, transfer an existing balance from another Lloyds Bank card and the APR will be dependent on your personal circumstances.
If, after reading all of this, you are still uncertain as to whether or not to take a credit card on holiday with you, then why not consider talking a pre-paid currency card instead? They work in much the same way as a phone top up card; you simply load the card up with your chosen amount of money and every time you use it to pay for something the cost is deducted from the amount left on the card. Should the card run out of money, it is very easy to top up the amount by usually either a phone call to the provider or by doing it online. The advantages of a pre-paid currency card are:
- No interest rates.
- Even if you have a bad credit history you will qualify for this type of card.
- It is easier to stick to a set budget.
- You are likely to get a competitive exchange rate with this type of card.
- If you lose your card, the issuer will cancel it and issue you with a new one, complete with the amount of money you had on it.
Inevitably, with the good comes some bad, so watch out for these:
- There may be ATM withdrawal fees.
- There may be top up charges.
- If you lose your card, there may be a replacement fee.
- Some providers may charge you a set up fee.
- Although many offer as good a rate as a credit card would, it’s worth remembering that the rate is taken at the date you charge the card up rather than the day you spend money on it. This means, should the rate go up you could lose out, but likewise if it goes down it could work in your favour.
The best pre-paid currency cards out there at the moment are from: The AA, the Post Office, FairFX, Caxton FX, Travelex and My Travel Cash. We would advise you use a comparison site, such as Money Supermarket, to get yourself the best deal.