A lot of people avoid using their debit and credit cards on holiday due to the lack of clarity and size of the charges applied when they do. The attractions of taking cash are obvious, but taking large sums pose a security risk. Your travel insurance policy will only cover you for a limited amount of cash (often a few hundred pounds) should you lose it or have it stolen. By contrast, if your debit or credit cards are stolen they can be cancelled immediately and replacements couriered to you.
Yet cards now offer not just security but also competitive exchange rates as well as no fees and cashback on your spending.
Should you take cash, a prepaid card, a credit card or just a debit card on holiday?
To understand the pros and cons of each read my article ‘The best way to carry money on holiday’. While nearly half of use rely solely on cash when traveling abroad the risk of loss and exceeding our travel insurance cash limit, in the event of loss or theft, are significant. While it's sensible to carry some cash (by the way here’s how to always get the best rate on foreign currency) the best rates can often be found on debit, prepaid and credit cards. So assuming you will take a card on holiday which gives you the best deal?
Best Debit Cards
The following is based on research by travelsupermarket.com which calculated the total cost for withdrawing €500 from a range of credit/debit and prepaid cards. While the research was carried out in euros in can be used as a proxy for other currencies too.
|
BANK |
Card Type |
Cost of withdrawing €500 |
Cost of making five €100 withdrawals |
|
Norwich & Peterborough BS |
Debit card |
£428.10 |
£428.10 |
|
Nationwide BS |
Debit card |
£437.66 |
£441.66 |
|
Halifax – Reward Account |
Debit card |
£441.37 |
£447.37 |
|
Barclays |
Debit card |
£442.40 |
£462.70 |
|
HSBC |
Debit card |
£444.87 |
£449.87 |
|
Lloyds TSB |
Debit card |
£445.40 |
£450.90 |
|
Santander |
Debit card |
£446.29 |
£449.82 |
|
NatWest |
Debit card |
£448.43 |
£449.87 |
The standout accounts are those from the Norwich & Peterborough (N&P) and the Nationwide Building Society. The other accounts are shown to provide comparative rates.
The above figures include all charges such as foreign usage fees and ATM charges. The N&P account is particularly attractive as they don’t impose usage fees, while Nationwide apply a small one. In addition there is no charge from N&P for withdrawing cash from your account while abroad.
But check the terms and conditions on the current accounts before switching as the N&P accounts will charge a £5 a month account fee if certain criteria (minimum of 5 transactions a month) aren’t met. Some even require that you pay regular amounts into their accounts and this is not reflected in the above research. But if you don’t want to switch your current account then a credit or prepaid car could be the answer.
Best Prepaid and Credit Cards
|
Card |
Card Type |
Cost of spending/ ordering €500 |
Notes |
|
Halifax Clarity Credit Card |
Credit Card |
£428.64 |
Loading (exchange rate fee) 0% Cash withdrawals Fee is FREE but interest paid on it even if repaid in full Representative APRs. 12.9% |
|
FairFX online |
Prepaid Card |
£437.56 |
Cash Withdrawals €1.50 / $2, Loading (exchange rate fee): 0%, Exchange rate determined by FairFX |
|
Post Office Platinum Card |
Credit Card |
£440.38 |
Loading (exchange rate fee) 0%, Cash withdrawals Fee £3 or 2.5%, Representative APRs 26.9% |
|
Caxton FX pre-paid card |
Prepaid Card |
£440.92 |
Cash Withdrawals Free, Loading (exchange rate fee): 0%, Exchange rate determined by Caxton FX |
The table above provides the best buys based on the same travelsupermarket research. The Halifax Clarity Card tops the prepaid and credit card chart. But for those who do not want to apply for a new credit card FairFX and Carton FX offer competitive exchange rates (the latter even has no withdrawal fees on cash).
However, watch out when using credit cards for withdrawing cash from ATMs. Almost all will charge you interest (as much as 6 week’s worth) on cash withdrawals from ATMs even if you pay off your balance in full upon your return to the UK.
So what should you do?
If you plan on regularly withdrawing cash while on holiday then the top debit card would be best. But if you are not happy with switching your current account to the likes of N&P then the prepaid offer from Caxton FX is among the cheapest way to spend and withdraw money while abroad (no ATM charges or set up fees). While the best credit cards will only suit those who plan to spend using their card and not withdraw cash. Of course you will have to apply for the credit card and there is no guarantee that you will receive the indicative rate shown, depending on your credit report.
One final trick to make your holiday money go further when spending on a card
If you are planning on spending on holiday using a card then you will often be asked whether you want to pay in local currency or in Sterling. You should always choose local currency otherwise the retailer can apply what is known as Dynamic Currency Conversion which typically means you end up paying around 4% more
Image courtesy of Sura Nualpradid / FreeDigitalPhotos.net
