Rosie | Edited by Sam D
Updated May 2017
When preparing to go on holiday, you might be so busy counting down the days till sunny climes and getting away from it all that you forget to think of holiday money. But getting it wrong could cost you £100s extra over the course of your trip.
We know that specialist overseas credit cards give you one of the best deals when you're spending abroad but, in true MSE style, we wanted to do some in-depth analysis on which card issuer offers the best exchange rates. Which really is the best card to take on holiday with you?
In this guide
What are specialist overseas credit cards?
A bit of background to this first. Debit and credit cards can be used wherever you see the Mastercard, Visa or Amex symbol, depending on what your card is branded. But, when you use it overseas, your card network has to translate your purchase into pounds sterling – the base currency of your card. There are two factors that have an effect:
- The payment network's exchange rate. If you look at any of your credit cards, it's likely to have a Mastercard, Visa or Amex logo. This is the card payment network, and all set their own exchange rates, which is the rate your bank gets when you use a card overseas.
You can check Mastercard's, Visa's and Amex's – note that with Amex, any non-US dollar spends are first converted into dollars and then into pounds (the calculator linked to for Amex does these two conversions as one).
- The non-sterling transaction fee. This is set by your card provider. For example, HSBC charges a 2.75% 'commission' if you use its standard debit card to spend abroad.
So, when you spend overseas, your bank or credit card provider first uses the wholesale rate set by Mastercard, Visa or Amex on the day your transaction is processed (typically a day or two after you've actually spent the money) to make the exchange.
Then it adds its commission, typically between 2.5% and 3% (you'll see the charge broken out on your statement). You may also see other fees for cash withdrawals, and a few even charge a fee for spending.
But this isn't our focus for this article. Some specialist overseas credit cards, like Creation Everyday or Halifax Clarity, don't charge this transaction fee. We know collectively these cards are one of the cheapest ways to spend abroad.
But are all these cards equal? Does it matter which you pick? We wanted to know, and for this, as there are no fees, it's a straight Mastercard versus Visa versus Amex comparison.
Mastercard vs Visa vs Amex battle - Mastercard usually wins
We've heard anecdotally that Mastercard's rates tend to beat Visa and Amex on overseas spending. But does Mastercard always offer better rates? Is this true for the euro and US dollar only (the main currencies we use for calculations), or is it a winner across the board?
To find out, we took the published exchange rates for Mastercard's, Visa's and Amex's wholesale rates for euros and dollars at two different dates in each month for a year from April 2016-2017 to give us a decent number of data points to compare...
As you can see, at almost every data point, Mastercard's rates are above the Visa and Amex ones (which more closely match each other). There are only a few points where the reverse is true. Breaking it down for euros and dollars, we had 54 different data points. Of these:
|Mastercard win||Visa win||Amex win|
Most of the time, the differences are small – not something you'd notice when spending $10 a time. But sometimes these differences can be quite large.
For example, on our data point near the end of May 2016, for the euro, there was a variance of €0.03 between Mastercard (which had the top rate) and Visa (which had the bottom rate) that day.
This is a huge gap for one euro being exchanged. Scale that up and you could have got €131.89 spending £100's worth on a Mastercard, compared with €128.99 on the Visa – a big €3 difference, given the low values involved.
So, Mastercard tends to win for the big, most-commonly used currencies, but what happens when we look at slightly lesser-used currencies?
We looked at two currencies, the Turkish lira and the Polish zloty; and the same holds true. Although we looked at only one data point per month for these currencies, we still see that the majority of the time, Mastercard holds the exchange rate crown. Amex and Visa vie for bottom place with both currencies.
How much better is the Mastercard rate than the Visa and Amex rate?
The charts above show you that Mastercard plastic, barring a few anomalies, gives you a better rate than Visa and Amex cards for comparable spending. But, how much better is the Mastercard rate?
We've analysed the spread by 'indexing' the Mastercard rate for euros over a year (meaning it's always 100 on this graph) and then allowing the Visa and Amex euro exchange rates to vary around it.
In practice, it's pretty close – closer than the graphs make it look, as the vertical axis has a small variance to emphasise the divergence. Though it does show that for the points we picked, Mastercard is the winner for all but five.
On average, from the euro and dollar data sets we looked at, Mastercard's exchange rates were 0.51% higher than Visa's and 0.44% higher than Amex's - though this difference has lessened since we last did our analysis, when Mastercard rates were around 0.7% higher than both. While we haven't checked every day and every currency, it's likely that the data we do have shows a pattern that would be replicated.
What does this mean in practice?
In practice, it means that – assuming other terms are the same – we'll place a Mastercard above a Visa or Amex card in our best buys for cards to take with you to spend abroad, and tell you that Mastercards tend to give you ever so slightly more bang for your buck.
If you don't have a specialist overseas card already, this might mean you pick a best-buy provider offering a Mastercard. However, if you do already have an overseas card which is a Visa or Amex and you're happy with it, it's probably not worth changing unless you spend a lot overseas each year.
For this research, we've pointed out and emphasised the differences between the two rates. But the fact remains that an average 0.48% gap between the three exchange rates will for most, going away only once a year, generally amount to a few euros' or dollars' difference over a holiday.
If you do want to get a new top overseas spending card, or change the card you have, then our top picks can be seen in the Cheap Travel Credit Cards guide. A brief summary is here:
Top travel credit cards that charge no fees on purchases
|Card issuer||ATM fee||Cash w/d interest||Rep APR (if not repaid)||Check your chances of getting it|
|Barclaycard Platinum Travel* (1)||Visa||None||None||18.9% (Cash 27.9% (2))||Eligibility calculator|
|Halifax Clarity*||Mastercard||None||18.9-25.9%||18.9%||Eligibility calculator|
|Santander Zero*||Mastercard||None||18.9%||18.9%||Eligibility calculator|
|Aqua Reward*||Mastercard||£3 or 3%||44.9-69.9%||34.9%||Eligibility calculator|
|Post Office Platinum*||Mastercard||£3 or 2.5%||27.9%||18.9%||Eligibility calculator|
|Aqua Advance*||Mastercard||£3 or 3%||39.9-69.9%||34.9%||Eligibility calculator|
|Saga Platinum (3)||Visa||£2 or 2%||None||11.9% (Cash 19.6% (4))||N/A|
|Lloyds Avios Rewards (£24 annual fee) (5)||Amex/ |
|£3 or 3%||18.9-25.9%||23.7% incl fee (18.9% on spending)||N/A|
|B Credit Card*||Mastercard||£3 or 3%||27.9%||9.9%||Eligibility calculator|
|Nationwide Select (current account custs only)||Visa||£3 or 2.5%||15.9%||15.9%||N/A|
(1) No non-sterling fees until 31 August 2022 (2) You'll pay interest on non-sterling cash withdrawals if you don't repay your balance in full each month. Sterling cash withdrawals attract interest from the day you make the withdrawal. (3) Over 50s only – you may not be accepted if you've four or more credit/store cards. (4) You'll pay interest on cash withdrawals if you don't repay your balance in full each month. (5) New card holders from November 2013.
Are there any other differences between Mastercard, Visa and Amex cards?
In the UK, you won't really notice any difference between Mastercard and Visa – your card's issued in pounds and you spend in pounds, so exchange rates don't affect you.
The main difference comes with the acceptance of Amex cards – as it charges retailers more to process transactions than Mastercard or Visa, you're more likely to find places that won't let you use Amex to pay.
If you use the cards abroad, you might see the same trend. Mastercard is accepted at more than 36 million retailers worldwide, Visa 40 million, and although Amex won't give us an exact figure, estimates are that they're accepted at around 16 million outlets worldwide.
It may be that retailers overseas accept one but not the others – it's unlikely that the cards have exactly the same coverage. Do let us know in the forum if you've found countries or cities where you couldn't use a Mastercard, Visa or Amex, but the others worked.