Cheap Travel Money Top cards for spending abroad

Where credit cards or loans use a representative APR, this means that 51% of successful applicants will be given the stated interest rate.

Credit Cards

With credit cards, the rate for purchases (as opposed to balance transfers or cash withdrawals) is used as the main rate to advertise the card.

So if that is described as 19.9% representative APR, then 51% of people accepted will get 19.9% APR, but 49% will get a different rate (likely to be higher).

Personal Loans

Loans are slightly simpler as they only have one rate. So if a loan is advertised as being 7.5% representative APR, this means 51% of accepted applicants will get 7.5%, and 49% will get a different rate (likely to be higher).

Of course, some people will be rejected outright for the card or loan too.

Let's dispel a myth. ‘Commission free', isn't the holy grail of finding the right bureau de change, it's just another way to confuse the equation. Foreign exchange bureaux make their money in two ways.

• Commission Charge. This is a fee added when you convert, effectively meaning that the amount of cash actually exchanged is less than the amount you hand over to the cashier.

• Exchange rates. This is more subtle, and is used particularly by the currency sellers who trumpet their ‘commission free' status the loudest. Much worse exchange rates are offered to the customer than those the bureau receives itself, so that the difference can be harvested as pure profit.

Most providers will use one or both of these charges. The vital question which must be asked, at all times, without exception, is "How many Euros/Dollars/Guatemalan Quetzals will you give me, after all charges, for my Pounds?" Whoever gives you the most is the one to go to.

Tight Tony v Generous Gordon – How to find out who's cheapest.

This example is designed to show the point...

Tight Tony's service is commission free, while Generous Gordon charges a £1.50 fee. However, a more favourable exchange rate offered at Gordon's Bureau means that although £1.50 less is being converted, you'll actually end up with more MoneySaving Dollars for your £100.

It is important to remember that the exchange rate is constantly changing, so your comparison of different bureaux should really be done all on one day, otherwise the outcome will be skewed.

There are four main charges that apply…

• A 'Load' on top of the Exchange Rate (Debit and Credit Cards).

  While exchange rates change daily, what you get always depends on the 'Visa/Mastercard wholesale rate'. It's about the best exchange rate possible, as it reflects currencies' real interchange value.

  This should mean more Euros, Dollars or Costa Rican Colons per pound, but unfortunately almost all cards secretly add a 'load', an extra charge usually of 2.75%. So the higher the 'load' the worse the exchange rate you get. This means £100 worth of Euro spending costs you £102.75. Worse still, it isn't broken down on statements so you won't notice .

  Technically there are two types of loading on cards.

  • The Issuer Fee is the load Visa adds itself, which has a standard setting of 0% in Europe and 1% for the rest of the world.
    
  • The Optional Fee is added by the card provider, as its cut of the currency conversion. This can be split and altered depending on each worldwide region.
    
  
  

• Cash Withdrawal Charges (Debit and Credit Cards)

  Withdraw money from an overseas cash machine and the card provider will add a fee, usually around 2.5% of the amount withdrawn with a minimum of, around £3. Many people are aware of this charge for credit cards, but it's important to note it applies to most debit cards too.

  Many overseas banks, especially in the USA, also charge an additional fee for withdrawing cash. Little can be done about this, except trying a few different banks to find the cheapest. Thus taking larger amounts out to cover a longer period is cheaper than lots of small withdrawals, though do ensure your cash is stored securely.

• A Penalty for Spending (Debit Cards only).

  Rather sadly, a few card providers have decided to take profiteering from holidaymakers up a level. Spend on a Halifax, IF, RBS, NatWest, Santander or Lloyds TSB debit card and you'll pay a fee each and every time, e.g. Halifax adds £1.50 per transaction.

  This means that the normal 'paying on the card's cheaper than making withdrawals' rule is defeated for these cards, so withdraw a large cash lump instead as it's cheaper. See the Holiday cards from hell section for more.

• Unexpected Interest Charge (Credit Cards only).

  Normally repay a credit card in full at the end of the month and you don't pay any interest. Yet withdraw cash and even if it's paid off in full, many providers still charge interest, often at a higher rate than spending.

  While this isn't exclusive to withdrawing cash abroad, in the UK it's rarely noticed as credit card cash withdrawals aren't common. Those who don't pay off in full will, of course, always be charged interest.

The following fees can apply when spending abroad on prepaid cards

• Application & Replacement Fees.

  Most cost £8 – £10 to open, displayed prominently on their websites. However, many also charge a sneaky ‘Replacement fee’, and set the expiry date to one year after opening. After twelve months, you’ll have to pay around £5 to keep using the card (and any funds already on it).

  A few cards also charge a monthly fee of a few quid simply for holding it; these very rarely work out as anything other than hideously expensive!

• Transaction Fees.

  Many cards charge you for retail purchases (just buying something in a shop), or withdrawing money from an ATM. Both fees usually jump when done abroad.

  Spending. Some cards levy a fee every time you spend, either a percentage of the amount, or a flat fee per transaction. If you make a high number of small purchases, go for a percentage fee; while those making fewer, higher value purchases should go for a set fee.

  Withdrawing. All prepaid cards charge for using ATMs, usually £1.50 to £2.50 per cash withdrawal. You’d be better off just keeping the cash in a Current Account, or a Basic Bank Account if you struggle being accepted for credit, than paying for this privilege.

• Inactivity charges.

  Prepaid providers want you to regularly use the card, racking up charges and boosting their profit. Therefore you’re often penalised if the card goes unused. A typical charge for this would be £2 per month if you haven't used the card in 12 months. So use it frequently enough to avoid this charge, even just to buy a bag of crisps (or one of your five daily fruit & veg!). Similarly, don’t over–load funds onto the card; most charge a fee to refund it.

• Exchange rate.

  If you’ve picked a card to use abroad, the rate of exchange is a sneaky hidden cost, governing how much spending power you get for your pounds. Most use the Mastercard/Visa rate, unbeatable by any bureau de change. However, some use their own, worse exchange rates; compare these to the best you’d get for cash by using the Travel Money Maximiser.