Using credit cards overseas
Once you’ve booked your holiday, whether it’s with family or friends, it’s time to start saving money and budgeting an allowance for your time abroad. However, spending on a credit card overseas can result in unexpected fees being charged to your account.
The simplest way to avoid card charges whilst travelling is to use a specialist overseas credit card, otherwise known as a travel credit card. Certain cards are tailored to travellers and holiday makers and can save you a lot of money that’s better spent on memories to treasure.
Why use a specialist overseas credit card?
When you travel abroad, using a credit card can be safer and more convenient than carrying a wad of cash. Less bulky to carry and able to be blocked if lost or stolen, credit cards are widely accepted and will take off some of the pressure off safeguarding your money while out and about in a new place.
There’s only one problem – most credit cards can incur hefty fees when used abroad. Along with a foreign transaction fee, you’ll be charged a foreign exchange fee every time you use your card, even on smaller transactions.
Cash withdrawals on credit cards are always costly and along with a charge for cash withdrawal you’ll usually start accruing interest on the money you withdraw straight away. Plus, you will still be charged this interest even if you fully clear your balance by your payment due date. Don’t fancy paying all of those charges? Have a look at specialist overseas credit cards instead, otherwise known as travel or holiday credit cards.
Benefits of using a travel credit card
- Low currency loading fees
- More favourable exchange rates
- Some offer cashback or air miles
Travel credit cards either charge low currency loading fees every time you use your card or none at all. A loading fee is a fee charged when a card makes a conversion to foreign currency. The lower it is, the more you could save every time you use your card. It’s also worth noting that the exchange rate you’re charged is the one accessed by your credit card provider.
These fees tend to be lower than those applied to debit cards and can often be significantly cheaper than withdrawing cash at your local exchange bureau. There are a few select cards that don’t charge for making withdrawals when you’re abroad either, though they will still charge interest from the point of withdrawal.
The best way to make sure you don’t overpay for the privilege of using a credit card while you travel is to clear your balance in full every month. This way you won’t pay interest, unless you’ve made withdrawals at a different interest rate. If you’ve got an introductory interest-free period on purchases, you’ll enjoy a little longer to clear your holiday spending.
Just be sure you don’t spend more than you can afford to pay back. Also, work out how much you have to pay back each month to get that balance to zero before your interest rate moves in the other direction.
Setting up a direct debit will ensure you don’t miss a payment or incur any late payment charges but if you don’t use your card for some time, your direct debit may not be active. For this reason, if you hold the same card for a long time, you should check your direct debit is still active as part of your pre-travel checklist.
Travel credit card rewards
Finally, if you’re a fan of a credit card perk, you’ll be pleased to know some travel cards come with features such as cashback or the ability to clock up air miles as you spend. You may even be offered a discount when purchasing your travel insurance with your card.
To help you fund future shopping sprees or adventures, cost effectively, be sure to check the value of any points collected. See if there’s any annual fee for holding the card, and always clear that card balance, so that you’re not paying interest that wipes out the value of your perk.
Compare travel credit cards
Thinking it might be time to explore your travel card options? By using our free moneymatcher tool, you’ll be able to see which cards you’re most likely to be accepted for without leaving a mark on your credit file. You can also compare rates and features to find a card that’s a great fit for you.
Don’t forget, you won’t always get the representative APR rate though at least 51% of those accepted will. And, if there’s a 0% purchase period, you might find you’re offered a shorter one of those as well.
Written by Robert Bester
Updated on 26th November 2019
Published on 13th December 2017