Travel Credit Cards

The 9 need-to-knows when spending abroad

Before you go on holiday, there are some things you need to know about how credit and debit cards work overseas. Get this wrong and it can cost you large, so please read the following (even if you only have time to read and remember the headlines, it should help protect your pocket).

• Specialist travel cards are so good for spending abroad because they don't charge fees

  Use your everyday plastic while on holiday and you could be hit by a host of hidden charges (for full details, read the hidden holiday spending charges note). These include:

  • Adding a non-sterling transaction fee onto the exchange rate, typically around 3%
  • Cash withdrawal fees
  • Interest charges even if you pay off in full (on credit cards)
  • In some cases, charging a penalty each time you spend

  But there are credit and debit cards that don't charge these fees, making them ideal to use when you're on holiday or buying from overseas websites.

  Use this checker to find out what you'll pay when using your existing card and check out our best buy cards below to find cards that don't charge.

  

  How much does your card charge? Find how much you pay to use your card abroad

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• You can save £100s per holiday using a specialist card

  When abroad you want to pay for only what you buy, yet using any bog-standard card means you're paying to pay, too. Here's how much spending €1,000 actually cost, in pounds, when we made comparisons on 9 July 2018 using our Travel Money Comparison tool (we assumed five €100 cash withdrawals and 20 transactions on the cards).

  • On a specialist credit card repaid in full: £889.83 (see cheapest credit cards)
  • Cash, via UK's cheapest bureau (pick up in London): £892.78
  • Cash from M&S (non-cardholder): £915.83
  • Using a debit card from hell: £946.25 (see debit cards from hell)
    
  • Change at airport (Gatwick South Terminal, ICE Travel Money, not pre-ordered): £1,046.46

  As you can see, the differences can be massive, yet the winners are simple. Apply for a specialist overseas credit card, then use it every time you go.

• If you're using a credit card, ALWAYS pay it off IN FULL every month

  Specialist overseas credit cards can be the best way to spend when you're on holiday, but can turn into one of the worst ways if you're not disciplined enough to pay them off. Always follow the golden rule:

  Set up a direct debit to repay in full every month, or the interest charges dwarf the cheap-currency gains.

Direct debits may be marked 'inactive' if a card hasn't been used in a 13 month period – so if your hols have more than a year between them, check the direct debit is still in place.

• Specialist overseas credit cards almost always beat their debit card counterparts

  Credit cards are easier to get as you can apply for one regardless of who you bank with, whereas for debit cards you're likely to have to switch accounts or open a new account that you then have to manage.

  Credit cards also give you the powerful Section 75 protection – a legal recourse for anything costing between £100 and £30,000 that you pay for using the card, meaning the card company's liable along with the retailer if anything goes wrong.

  There is one exception where credit cards don't usually win: if you mostly spend cash. Most of the credit cards charge fees or interest, or both, when you take cash out abroad (Barclaycard is the exception if you repay in full). But specialist overseas debit cards don't charge fees or interest for withdrawals, meaning they can often be cheaper.

• If they ask 'want to pay in pounds or euros?', say 'euros'

  Many overseas hotels, shops and ATMs ask this when you pay by card. If you choose pounds, the retailer does the currency conversion – but rates can often be poor compared with letting your card do it (choosing euros) - see Martin's euro analysis.

  If you've got a top overseas card, always choose the local currency, as your card does the exchange and it's unbeatable.

  If you're using a bog-standard credit or debit card, it's touch and go. Sometimes the card machine will show you the 'non-sterling cash fee'. If this is under 2.5%, go with pounds. If it's over, pick the local currency.

• First use our eligibility calculator to find cards you're most likely to get – and protect your credit score

  Usually, the only way to know if you'll be accepted is to apply, but each application marks your credit file. But our Travel Credit Cards Eligibility Calculator quickly shows your odds of getting almost every top travel credit card so you can find the ones most likely to accept you, thus minimising applications.

  Quick questions

  How does the eligibility calculator work?

  It uses a 'soft search', which is one you will see on your credit file but lenders usually don't (and where they do they can't use the info), to give us an indication of your credit score. We then match this against lenders' criteria for acceptance so we can show you the odds of getting each card.

  Once you have this knowledge, it will allow you to make a smarter application. Therefore, you're less likely to be rejected and less likely to need to apply elsewhere, which would add another mark on your credit file.

  Or join our Credit Club for a full credit health check

  The MSE Credit Club is a game-changer. For years the credit market has been shrouded in mystery but our revolutionary tool brings together the key components to give you the full picture, and crucially, what it means for your acceptance chances and how to boost your creditworthiness. A credit score alone isn't enough to borrow, as there are other factors at play (it's why many with perfect scores still get rejected). Credit Club shows your Free Experian Credit Report and Credit Score, your Affordability Score, you Credit Hit Rate and much more.

• Beware your debit card – it could be the worst way to spend

  Let's make this plain – do not use the following cards for spending overseas. Any of the methods in this guide beat them. Nine debit cards have nightmarish charges every time you use them overseas. With most debit cards, you pay a non-sterling transaction fee for spending, typically around 3% of the transaction, and a charge if you withdraw cash abroad.

  But these cards have another sneaky charge: a spending fee of £1-£1.50 each time you use your card. Imagine you buy something for £5 in a shop. With the worst of these cards, it can end up costing £6.60 with the fee and charges.

  The cards from hell

  Santander Debit Card

  Spending penalty: £1.25 | Load fee: 2.75% | Cash withdrawal: 1.5% (min £1.99)

  TSB Debit Card

  Spending penalty: £1 | Load fee: 2.99% | Cash withdrawal: 1.5% (min £2 max £4.50)

  Bank of Scotland Debit Card

  Spending penalty: £0.50 | Load fee: 2.99% | Cash withdrawal fee: 1.5% (min £1.50 max £4.50)

  Lloyds Debit Card

  Spending penalty: £0.50 | Load fee: 2.99% | Cash withdrawal fee: £1.50

  Halifax Debit Card

  Spending penalty: £0.50 | Load fee: 2.99% | Cash withdrawal fee: £1.50

  IF Debit Card (existing custs only)

  Spending penalty: £1.50 | Load fee: 2.25% | Cash withdrawal fee: £1.50

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  The cards below don't have a specific spending penalty, but instead charge a minimum exchange fee, meaning these are hell for small spends. Without this, a £5 spend on these cards would cost £5.14, but this minimum exchange fee bumps it up to £6 or £6.50...

  Clydesdale/Yorkshire Debit Card

  Spending penalty: none | Load fee: 2.75% (min £1.50) | Cash withdrawal: 3.75% (min £1.50)

  RBS Debit Card (no spending fees until Fri 31 Aug)

  Spending penalty: none | Load fee: 2.75% (min £1) | Cash withdrawal: 2% (min £2 max £5)

  NatWest Debit Card (no spending fees until Fri 31 Aug)

  Spending penalty: none | Load fee: 2.75% (min £1) | Cash withdrawal: 2% (min £2 max £5)

  Full list of charges for major UK credit and debit cards.

• Is spending or withdrawing cash cheaper when I'm on holiday?

  If you've a top overseas credit card, spending is always cheaper. Even on cards with no cash withdrawal fees, you'll usually still pay interest on the withdrawal until you pay it off (the Barclaycard below is the rare exception to this).

  This goes double for non-specialist credit cards. You'll pay the non-sterling transaction fee on all transactions overseas, but you'll also pay a fee and interest on cash withdrawals.

  On debit cards, spending is still cheaper as while there's no interest on a cash withdrawal, there's usually still a fee (as well as the non-sterling transaction fee) when you use a cash machine.

• Not all cards are equal – check if the card you're applying for has the Mastercard, Visa or Amex logo

  When you spend abroad, your bank gets an almost perfect rate when it does the exchange for you. It exchanges at Mastercard's, Visa's or Amex's wholesale rate, all of which are pretty close to the spot rate that the currency markets suggest (the perfect rate) – though Mastercard's rates tend to be slightly better.

  However, most banks then charge you for having them make the exchange for you, and this is where the up-to-3% non-sterling exchange fee comes in.

  But some banks and credit card providers waive these fees. They give you the near-perfect rate without any non-sterling transaction fee. It's these cards that are in this guide, as they allow you to spend the right way overseas.