If you’re lucky enough to be jetting off abroad this year, or you’re already planning next year’s trip, it’s important to consider your spending options carefully, particularly if you’re planning on taking a credit card with you.
Many standard credit cards charge high fees for spending overseas and this can rapidly become expensive if you use your card regularly. It’s therefore worth looking for one that allows you to avoid paying these fees when you’re abroad.
What is a travel credit card and how does it work?
Some credit cards - often referred to as travel credit cards - are designed specifically for spending overseas. This means they won’t charge you each time you use them abroad.
You can spend on your travel credit card wherever you are in the world (providing the retailer accepts credit cards), which makes this type of plastic ideal for those who travel frequently.
What’s more, all purchases that cost more than £100 and less than £30,000 will be protected under Section 75 of the Consumer Credit Act. This means that if the product you buy is faulty or not the same as the description, or if the retailer or trader goes bust, your credit card provider is jointly liable with the retailer and you can seek compensation. You can read more about how Section 75 works in our guide.
How much does a travel credit card cost?
When you make a purchase with a credit card overseas, your bank will usually charge you a fee for converting the amount you spend from the local currency to pounds sterling. This foreign exchange fee is often around 2.75% to 2.99%, which means for every £100 you spend, you’ll pay an extra £2.75 to £2.99 on top.
Should you choose to withdraw cash on your credit card, you’ll pay the foreign transaction fee as well as a cash withdrawal fee which is typically around 2.99% of the amount withdrawn. This means if you withdrew £100, for example, you could pay £2.99 for the foreign exchange fee, plus another £2.99 for the cash withdrawal fee - or £5.98 in total.
In addition, you’ll pay interest from the moment you withdraw your cash, even if you pay off the balance in full each month. As a result, using your credit card at an ATM can end up costing a pretty penny.
Travel credit cards, however, allow you to sidestep many of these fees. Most won’t charge foreign transaction fees and many don’t charge cash withdrawal (or cash advance) fees either. But - and this is a big but - you will still usually be charged interest from day one and again, this will be charged even if you clear your balance that month.
Also be aware that some travel credit cards may come with a monthly or annual fee so this is worth checking before you apply.
The best travel credit cards - October 2020
The table below shows the top five deals for travel credit cards:
|Provider||Foreign transaction fee||Cash withdrawal fee||Representative APR||Cash withdrawal APR||Extra features|
|Barclaycard Rewards Credit Card||0%||0%||22.90%||22.90%||Earn 0.25% cashback on your everyday spending.|
|Santander Zero Credit Card||0%||0%||18.90%||18.90%||No interest is charged on overseas spending as long as the balance is repaid in full. (A small amount of interest is charged on overseas cash withdrawals)|
|Halifax Clarity Credit Card||0%||0%||19.90%||19.95% or 27.95%*||N/A|
|118 118 Money Credit Card||0%||0%||34.00%||34.00%||You won’t be charged interest on overseas purchases or cash withdrawals so long as you pay off your balance in full that month. This card can suit those with lower credit scores, but credit limits are low at £500.|
|Post Office Travel Credit Card||0%||2.5%||24.90%||24.93%||N/A|
*The interest rate will depend on your individual circumstances.
Best travel credit card for rewards
The Barclaycard Rewards credit card is a good choice for those looking to earn something back as they spend. It offers 0.25% cashback on all purchases you make - but note this does not include balance transfers, money transfers, cash withdrawals, buying currency or traveller’s cheques. It also does not include gaming-related transactions such as gambling, betting or buying lottery tickets. In addition, you’ll be able to save money on live events with Barclaycard Entertainment.
To ensure you fully benefit from cashback offers, it’s important to pay off your balance in full each month. If you don’t, you’ll pay interest at a rate of 22.9% pa (variable) which could soon outweigh any of the card benefits.
Best travel credit card for cash withdrawals
Withdrawing cash on holiday can be expensive, but if this is something you’re likely to do regularly, the 118 118 Money credit card could be a good option. Unusually for a credit card, it won’t charge interest for cash withdrawals, providing you pay off your balance in full each month. In comparison, most credit cards charge you interest from the moment you withdraw your money, even if you clear your balance that month.
Best travel credit card for poorer credit scores
Your credit score will influence whether or not you are accepted for a credit card and the amount of interest you are charged if you are. However, the 118 118 Money credit card guarantees a credit limit of £500 and you'll pay the interest rate advertised if you’re accepted for the card. This means if your credit score is fairly low, the 118 118 Money credit card could be a good option.
Providing you stick to your credit limit and pay off the balance on time each month, this card could help to improve your credit score over time. Note that there is a minimum annual income requirement of £8,400. It may be worth looking at our article 'Compare the best credit cards if you have bad credit'.
Pros and cons of travel credit cards
- Travel credit cards can be much cheaper than standard credit cards when used abroad.
- Some travel credit cards offer extra benefits such as interest-free purchases or cashback.
- Most travel credit cards offer competitive exchange rates.
- Purchases are protected under Section 75 of the Consumer Credit Act.
- Some credit cards charge monthly or annual fees.
- If you don’t pay off your balance in full each month, the amount of interest charged can be high.
- Although cash withdrawals are often fee-free, you’ll usually still be charged interest from the day of the transaction.
- You’ll need a good credit rating to be accepted for the best deals.
Things to consider before using a travel credit card
If you’re planning to use a travel credit card on holiday, it’s important to check the following before you apply:
- Are there any monthly or annual fees?
- Will you need to withdraw cash on your credit card and if so, how much will you be charged If you need to do this regularly, it is worth looking for a credit card that won’t charge fees or interest.
- Can you afford to pay off your balance in full every month? If not, it is worth looking for a credit card that offers 0% interest on purchases for a number of months.
- Is your credit score high enough to be accepted for the most competitive deals?
Alternatives to travel credit cards
If you’re not sure whether a travel credit card is right for you, there are a few other options to consider. We have outlined some of them below:
Prepaid travel cards
Unlike credit cards, prepaid travel cards allow you to load them up with cash before you set off on holiday and you can then spend on them in the same way as a debit card. If you get low on funds, you simply top up again.
Prepaid cards can be a good option if you are on a budget as you will only be able to spend what’s on the card and, because you’re not borrowing money, there’s no interest to pay. Credit checks are not usually carried out either (although there may be an identity check), so they can be a good choice if you have a poor credit score.
Some prepaid travel cards require you to load them with foreign currency such as euros or dollars, depending on where you’re travelling to. Others enable you to spend in several different currencies on the one card. Just keep in mind that car hire firms, petrol stations and some hotels often won’t accept prepaid cards.
Below we have listed the top three prepaid travel cards to consider:
Digital bank Revolut offers a prepaid currency card that offers fee-free spending abroad in more than 150 currencies at the interbank exchange rate. This is the rate that banks offer to each other when exchanging currencies and it is more competitive than the rate offered by most other prepaid cards.
You can exchange money for free on weekdays, so long as you exchange no more than £1,000 a month (this is down from the previous £5,000 a month). Anything over this is charged a fair usage fee of 0.5%. There is also a 1% mark-up for Thai Baht and Ukrainian Hryvnia. At the weekend, there is usually a mark-up of between 1% and 2% to pay as foreign exchange markets are closed.
Cash withdrawals are free up to £200 a month - anything over this will be charged a fee of 2%. To read more about Revolut, check out our full, independent Revolut review.
With the WeSwap card you can store money in ‘wallets’ in 18 different currencies. The card works by letting travellers swap currencies directly with each other. If you swap seven days in advance, you’ll pay a 1% fee, if you swap three days in advance there’s a 1.3% fee, and if you need to swap instantly you’ll pay 2%.
Cash withdrawals are free if you withdraw more than £200, otherwise, you’ll pay £1.50 (or the currency equivalent).
CaxtonFX offers a prepaid currency card that can be loaded up with 15 different currencies. If your chosen currency is not there, you can load the card in sterling and it will be converted to the local currency when you spend. There are no foreign transaction fees and no ATM fees when you use your card abroad.
Alternatively, you could choose to take a debit card on your travels - but again, it’s important to choose one that won’t charge you for spending overseas. Here are three top options:
Starling Bank offers fee-free spending abroad as well as free cash withdrawals and you’ll get the Mastercard exchange rate. Note that the account must be operated via the app. For more information on Starling Bank, read our independent Starling Bank review.
If you open a Monzo bank account, you can use your debit card anywhere in the world for free and again, you’ll get the Mastercard exchange rate. ATM withdrawals are fee-free in the European Economic Area (EEA), while in other countries you can withdraw up to £200 for free every 30 days. After that, you’ll be charged a 3% fee. Again, the account needs to be operated via the app. For more information on Monzo, read our independent Monzo review.
If you have a Virgin Money bank account you won’t be charged for using your debit card overseas. There are no fees for foreign transactions and no fees for ATM withdrawals. What’s more, the account also offers interest at 2.02% AER on credit balances up to £1,000.
If you open a Curve account you can spend on your current debit and credit cards abroad without the extra fees. Opening a Curve account means you don't have to apply for an additional credit card for travel and can use your existing one instead. Simply choose which bank card or credit card to use abroad within the Curve app and you will benefit from the interbank exchange rate and little to no ATM withdrawal fees. Depending on which Curve card you have there are limits to how much you can spend and withdraw abroad for free each month. Find out more information on Curve in our independent Curve review.
Should I get a travel credit card?
Whether a travel credit card is right for you will partly depend on whether you can afford to pay back what you spend each month. Even though travel credit cards won’t charge you a fee for spending abroad, if you are unable to clear your balance at the end of the month, the amount of interest you’ll pay could make it an expensive option.
You’ll also need to consider your credit score - if your credit score is low, you’re unlikely to be accepted for the most competitive travel credit cards, in which case a prepaid card or debit card is likely to be a more suitable choice.
However, if you are careful about the amount you spend on your card and you have a good credit rating, a travel credit card can be a useful way to pay for excursions, restaurants and other expenses while you’re away and you’ll have the reassurance that all purchases you make will be protected under Section 75.
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