How to save money with a travel credit card
Written by Robert Bester, Consumer Finance Expert Robert has been a writer for six years, specialising in consumer finance and the UK lending market. Concentrating on consumer credit products, Robert writes informative articles that help customers manage their personal finances efficiently.
1st March 2021
5 minute read
Have you ever arrived back off holiday and plucked up the courage to look at your bank statement? It can be a genuinely frightening experience, especially if you hadn’t kept track of your spending. That is, unless you’ve been using a travel credit card to avoid hidden charges.
We all spend more than we’d like when we go on holiday. Whether it’s a meal at a local restaurant, booking excursions after sunning yourself by the pool or buying souvenirs before a return flight, there’s always additional expenses whilst abroad. If you’ve planned ahead, you can often budget so you aren’t overspending.
But one way that overspending can happen without you even having a say is how you spend on holiday. In other words, if you use a standard credit or debit card, it can determine if you spend more or less because of hidden charges that banks will apply on foreign transactions.
One way to avoid these completely is by using a travel credit card as an alternative to how you would normally make purchases. This allows you to make purchases on holiday without worrying over hidden fees or charges that can be added on without you knowing.
What happens if I just use my own credit or debit card on holiday?
After all the organisation that goes into a holiday, especially when you have a family to organise too, the last thing you might think of is which card to use when paying for things.
The only time it will start to dawn on you is when you check your bank statement. Charges that go alongside your spending can have a big impact over the course of a week or two, and can sometimes be just as much, if not more than smaller purchases you might be making.
When spending on holiday you can accumulate the following hidden charges:
- Spending fee – this is a charge applied as standard every time you use your card abroad. This is a set fee that doesn’t change, even if you’re making a small purchase. In fact, it can sometimes be more expensive than the thing you’re buying!
- Load fee – this is applied every time you spend abroad and the local currency needs to be converted to pounds, or vice versa. It can actually be applied twice; once from the card provider and once from the issuer (Visa, Mastercard or AMEX)
- ATM withdrawal fee – if you choose to withdraw cash while on holiday you will be charged a percentage fee each time you withdraw. Your provider will sometimes require you to withdraw a minimum amount each time as well
Why should I use a travel credit card instead?
A travel credit card is specially designed for spending abroad, mainly because it protects you against the hidden charges that can be applied by your card provider.
The fees described above will either be at 0% on your travel credit card or simply won’t be applied while you are spending abroad. This means that you only spend what you want to spend and don’t have to worry about racking up a large bill (and a scary bank statement) by the end of the holiday.
In addition, with a travel credit card you will often get the best exchange rate between pounds and the local currency. The conversion happens a few days after the transaction is made but can be much more favourable than having the retailer or lender calculate it for you using a standard credit or debit card.
Along with being advantageous compared to other types of credit or debit card, putting your purchases on a card is a lot safer than carrying lots of cash around. Not to mention Section 75 of the Consumer Credit Act, which also offers added protection for purchases over £100 and under £30,000.
Key facts when picking the best travel credit card
It’s worth browsing around the major providers a few weeks prior to your holiday, especially as it can take around a week to be issued to you after a successful application. Also it means you can gather the most amount of information and find out which travel credit card is the right one for you. It’s what any wise Guru would do.
Each card will indicate what, if any, fees are charged for using it abroad. This will include what you can expect to pay each time you spend, what the load fee might be and how much you will be charged when withdrawing cash.
The best of the bunch will have 0% or no fee for most if not all of the hidden charges, with the most important being the spending fee. Some will offer no charge for cash withdrawals which is handy, but not always necessary.
Like all major credit cards you can also see what the Annual Percentage Rate (APR), which should be around 20% but can be more.
As ever, it’s always worth checking your credit score before you apply for any credit card, just to give you an indication whether you will be accepted or not.
Advice for saving money with a travel credit card
- Actually take the card with you on holiday – once you have selected your travel credit card and successfully applied for it, make sure you pack it in your luggage and don’t leave it at home! You’ll be kicking yourself all the way to the airport, which is difficult to do when carrying so much luggage
- Be clear on the limits of your card before you travel – you should already be aware of the facts around your card and know exactly how you should be using it. Remember that if you were already budgeting for expenses to keep to the same limit on your travel credit card too. This will ensure you aren’t penalised for overspending yourself – as tempting as it might be
- Always choose to spend in the local currency – you should get the option every time you spend of paying in pounds or the local currency. Always choose to pay in the local currency as the conversion will be done with your lender, who will give you a much better rate than the retailer converting from pounds
- Spend rather than withdraw from an ATM – unless you’re lucky enough to choose a card with absolutely no withdrawal fees, you’re best off avoiding ATM withdrawals altogether and stick to spending on the card instead. That way you will only be paying for what you purchase
- Make repayments every month in full – it’s no good avoiding all those hidden charges if you’re just going to be stung with interest payments after your holiday has finished. To make sure you save money in the long run, always pay off your travel credit card in full every month and don’t fall behind on payments
Welcome to stress-free holiday spending
Now that you have the best advice to make sure you avoid spending even more without you knowing about it, all that’s left is to go on holiday.
But before you rush off in your flip flops and sunglasses hastily applying sun tan lotion, browse through our range of travel credit cards and choose the one that’s right for you. You can even use our free moneymatcher comparison tool to make your choice even easier.
So get yourself packed, get on that plane, and enjoy your holiday safe in the knowledge that you’re saving money with every purchase.