Regularly go on holiday or shop on foreign websites? You could benefit from a specialist travel credit card that offers fee-free spending and great exchange rates on foreign transactions.
What are travel credit cards?
When you make a purchase or take out cash in another currency on a debit or credit card, your bank will charge you to convert what you spend into pounds sterling.
Two factors will determine what this costs you: your card’s payment network exchange rate set by Mastercard, Visa or American Express, and the fees your provider adds on top.
Specialist travel credit cards don’t come with these fees, making it much cheaper to spend abroad or on foreign websites in another currency.
How much does it cost to use my credit card abroad?
You could face a range of charges for using your regular plastic overseas.
Typically your card will either exchange at the Mastercard, Visa or American Express wholesale rate, which are near perfect.
However, providers then apply a variety of fees to make the exchange depending on the type of transaction – which is where costs can really start racking up.
There are three different types of charges that can be layered on when using a credit card:
- Non-sterling transaction fee This is a percentage of the value of each transaction. You’ll typically pay up to 2.99% each time you use a credit card.
- Non-sterling cash fee You can also expect to pay a fee of around 3% (minimum £3) when you take money out of an ATM with a credit card.
- Interest on cash withdrawals When using a credit card you’ll be charged interest on cash withdrawals straight away, which can be a lot higher than the interest you are charged for purchases.
So it’s important to choose carefully, as some cards could prove to be a costly travel companion. Use the wrong card and you could be hit with all three of these charges.
Specialist travel credit cards will normally waive the non-sterling transaction fee and in some cases the cash fee too, making it much cheaper to spend on foreign transactions.
How much does your card charge?
Now that you know what to look for, check what your credit card provider charges on foreign transactions to see if you might be better off with a specialist travel credit card.
Most credit card providers charge a non-sterling transaction fee of 2.99% and a non-sterling cash fee of 3% (minimum £3), plus cash advance interest that can be as high as 29.9% and sometimes charged daily.
So a card spend of £10 can cost you 30p but a £10 cash withdrawal could cost you £3.30 at the time plus interest that will depend on the terms of the card.
What are the best credit cards to use abroad?
The table below reveals the top credit cards to use for overseas spending or shopping in a foreign currency.
Please note that the information in this article is for information purposes only and does not constitute advice. Please refer to the particular terms & conditions of a credit card provider before committing to any financial products.
|Credit card and issuer||Non-sterling transaction fee||Non-sterling cash withdrawal fee||Representative APR|
|Metro Bank Personal Credit Card (Mastercard)||0%||0%||14.9%|
|Representative example: assumed borrowing of £1,200 for one year, at a purchase rate of 14.9% (variable), representative 14.9% APR (variable). Credit available subject to status. Terms apply.|
|Halifax Clarity Credit Card (Mastercard)||0%||0%||19.9%|
|Representative example: assumed borrowing of £1,200 for one year, at a purchase rate of 19.9% (variable), representative 19.9% APR (variable). Credit available subject to status. Terms apply.|
|Barclaycard Rewards Credit Card (Visa)||0%||0%||22.9%|
|Representative example: assumed borrowing of £1,200 for one year, at a purchase rate of 22.9% (variable), representative 22.9% APR (variable). Credit available subject to status. Terms apply.|
Data correct as of 1 April 2022. These credit cards don’t charge any fees for overseas spending or cash withdrawals.
Who are the best travel credit card providers?
It can be difficult to know which provider to pick, and when you become a customer it can be too late to change your mind.
Which? has reviewed how 26 credit card providers have performed based on customer service, ability to manage your account, and keeping you in the loop with new deals.
Travel credit cards: the golden rules to follow
If you’re planning to use a travel credit card on your next trip, make sure you follow these golden rules.
1. Don’t withdraw cash
Even with a card that doesn’t charge a fee for overseas cash machine withdrawals, you may still want to avoid taking money out.
This is because you’ll typically incur interest straight away and sometimes at a higher rate.
If you’re organised and pay off your credit card really quickly, you can prevent these charges racking up. But this may be a hassle you’d rather avoid.
There is also a small risk of harming your credit rating if you use your credit card for ATM withdrawals.
2. Spend in the local currency
If you’ve got a top overseas card, always choose the local currency, as your card does the exchange at the best rates.
3. Avoid borrowing if there’s no 0% period
You should aim to pay back what you owe each month to avoid interest racking up, unless you can secure a card with a 0% purchase period.
Travel credit card FAQs
Confused about travel credit cards? Check if we have the answer to your question below.
Is a travel credit card right for me?
If you regularly travel abroad, you could save with a dedicated credit card to use on your trips.
Not only will it be more convenient and safer than carrying piles of cash, but the best ones let you spend at a great exchange rate and without incurring any fees.
What exchange rate do I get on a travel credit card?
When you make a payment abroad with a credit card, your bank will either exchange at the Mastercard, Visa or Amex wholesale rate, which are all very close to the spot rate at the time.
However, the rate you get will be the rate when the transaction is processed by your card provider, which is usually a couple of days after you used the card.
So, if the exchange fluctuates between you making the purchase and your card provider processing it, then you could end up paying more (or less) than what you bargained for.
Should I pay by card or withdraw cash?
If you have a good overseas credit card, spending on the card will be cheaper than withdrawing cash.
Even on cards that don’t charge a non-sterling cash fee, you will still be subject to the interest on the withdrawal from the moment you take it out until you pay it off.
Is it better to spend on a debit card?
Like credit cards, there are good and bad debit cards to use overseas.
With most debit cards you pay a non-sterling transaction fee for spending, which is around the 3% mark, and some banks also charge a non-sterling purchase fee and to take out cash you will be hit with the non-sterling transaction fee plus a non-sterling cash fee.
However, typically it’s easier to take out a specialist credit card rather than switching your current account for the travel perks.
Is it better to pay in local currency or sterling?
When you’re abroad you will get asked if you want to pay in sterling or the local currency fairly regularly.
If you choose pounds, the retailer does the currency conversion – but rates can often be poor.
As long as you have a top overseas card, always choose the local currency, as your issuer does the exchange, and the rates are usually the best at the time.
Will my card get blocked when I spend abroad?
Your card might be blocked if you don’t tell your bank or credit card provider your travel plans.
This is to prevent fraud but could be a big issue on your holiday, especially if you haven’t brought along any other ways to pay.
You should call your card company to let it know you’re going abroad before you travel.
Should I use a specialist card when on foreign websites?
When you shop online on foreign websites in a foreign currency, the same charges apply when using your regular plastic.
So using a specialist overseas credit card to shop on foreign websites in a foreign currency will be much cheaper.
Will I get Section 75 protection with a specialist overseas credit card?
This means that if something is wrong with a product or service you’ve paid for on your credit card, you can reclaim the money from your provider if the retailer doesn’t make good.
This is especially beneficial when you make a purchase abroad and it goes wrong.