Part 1: How Do Use Abroad Credit Cards Work?
EVERYONE likes the security of having a credit card in his or her wallet on trips overseas as credit cards can offer great reassurance when travelling.
The only downfall is, when you do need to use your carefully packed credit card, how much is reassurance really going to cost you?
 Current best credit cards for use abroad: |
| Post Office Credit Card |
- 0% fee on use abroad
- 0% fee on foreign currency bought from the Post Office |
 |
| Nationwide Gold Credit Card |
- 0% fee in Europe
- 1% fee rest of world |
|
| Santander Zero |
- 0% fee on use abroad |
Existing customers only |
What fees are charged when I use my credit card abroad?
- Foreign transaction fee
Most credit card companies charge what is a called a 'foreign transaction fee' when you use a credit card abroad.
The actual cause of this fee is using a credit card to pay for goods or services (or to access cash) in a currency other than pounds sterling.
The 'foreign transaction fee' comes under many different names, with some credit card companies referring to it as a 'loading fee' or 'foreign exchange fee' or even an 'exchange rate adjustment fee'.
Depending on the card issuer, most credit cards charge from around 2.75% to 2.99% of the transaction amount as the foreign transaction fee - which works out at between £2.75 and £2.99 for every £100 spent abroad on your credit card.
There are, however, a few credit cards that charge a cheaper fee and some credit cards that waive this fee altogether. Namely, the Post Office credit card - which offers "0% commission on purchases abroad" - in other words, there is no foreign transaction fee.
Nationwide's Gold credit card also offers commission free use abroad, although still passes on the Visa charge on use outside of Europe, meaning you pay 0% on foreign use within Europe and 1% on foreign use outside of Europe.
- Cash handling fee
As much of an added cost in the U.K. as it is abroad, using a credit card for getting your hands on some fast cash usually carries higher interest rates, handling fees and there is often no interest free period on these transactions.
When travelling or jumping on a flight for a weekend away, making sure you have enough Euros can be more costly than simply the current rate of exchange.
Aside from all the fees exchange bureaus add on, buying foreign currency, or even traveller's cheques, with a credit or debit card can carry many hidden expenses.
Many debit cards now even charge handling fees when purchasing foreign currency or traveller's cheques.
By far the cheapest way to stock up on Euros, or any other currency before catching your flight is to visit a competitive bureau de change in the U.K. and buy your currency in cash - you can always withdraw the money from a nearby ATM machine on your debit card.
If you do need to use a credit card abroad to withdraw cash, make sure you know how much it is costing you.
On top of the foreign transaction fee charged for any kind of transaction abroad, cash withdrawals also usually carry higher rates of interest and handling fees.
There are credit cards available however that offer cheap cash withdrawal rates - often as low as the rate for purchases and some even waive the cash handling fee too.
A new offer from the Post Office is they are now waiving the cash handling fee on purchases of foreign currency from the Post Office, a saving of about 2.5%.
What else do I need to be aware of when using a credit card abroad?
- Dynamic currency conversion charge
Whilst not any fault of the credit card issuer, the dynamic currency conversion charge is a hidden expense that can be easily avoided.
Many overseas retailers may try and offer you the ability to pay in your currency (pounds sterling) rather than the local currency.
While this may sound like a promising way of avoiding the foreign transaction fee, this method of payment abroad actually carries much costlier charges of its own.
Dynamic currency conversion (which is what they are offering) - often carries a rather hefty 4% charge - almost double that of a foreign transaction fee.
By law, these retailers should allow customers to make the choice themselves - so be aware of this cunning ploy and always opt to pay in the local currency if you can.
What does a 'use abroad' credit card offer?
Use abroad credit cards offer cheaper rates and cheaper fees when they are used outside of the U.K.
Choosing the right credit card to pack for holidays in the sun can really save you a lot of money in cutting down on the often hidden expenses jetting abroad can carry.
What other travelling services can credit cards offer?
Many people are unaware of how useful a little piece of plastic can be abroad, with many credit cards offering services over and above the call of duty for a credit card.
Aside from the usual purchase and fraud securities that can make a credit card great to use at home, credit cards can also offer services when you're travelling abroad too.
Among the services on offer, there can often be found insurance policies covering accidents and serious injuries, travel inconvenience - lost luggage and / or flight delays, and sometimes even full comprehensive travel insurance policies - and all this free, just for paying for your trip on your credit card.
Credit card companies also sometimes offer cardholders additional services, including emergency assistance for medical or legal problems encountered abroad and also emergency cash and card replacement services wherever you happen to find your card missing in the world!
If you are a regular traveller, it may even be worth picking up a travel reward or air mile credit card - to earn some money off your next flight.
Certain travel reward or air mile credit cards even offer exclusive cardholder extras, bringing you the luxury of priority check-ins, VIP airport lounge access, free upgrades and special offers!
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A few more money tips for when you're abroad...
- Use a debit card to withdraw cash from ATM machines.
- Your bank may still charge a foreign transaction fee, but unlike a credit card you won't be charged interest or handling fees for cash withdrawals.
- Use cash to buy foreign currency (including traveller's cheques)
- The most money saving way to buy foreign currency is to buy it with cash in the UK before you depart.
- Use your debit card to withdraw the cash at a nearby ATM - most debit card cash withdrawals in the UK are fee-free. Then use this cash to buy the foreign currency. This way you'll avoid any foreign transaction fee your bank may levy on your debit card too.
- Buying foreign currency is classed as a cash withdrawal, and on credit cards can incur handling fees, higher interest rates and you'll usually be charged interest straight away. This is also on top of any foreign transaction fee you'll also be charged.
- Traveller's cheques are also considered 'cash', and are charged by credit cards the same as buying currency notes. So always buy traveller's cheques with cash if you can - and your debit card as a second choice (with your credit card coming in as a last resort).
- Use a credit card for purchases, especially if buying goods over the Internet.
- Credit cards have in-built security to help protect against fraud. Some credit cards also offer free purchase protection and Internet delivery insurances, as well as online fraud guarantees.
- Section 75 - a part of UK law that holds the credit card company equally liable with the supplier for damaged, faulty or non-delivered goods as well as if the supplier goes bust - is not limited to UK purchases and will give you protection on your purchases that you buy anywhere abroad or over the Internet.
- Pay for your travel flights and hotels with your credit card.
- Some credit cards offer free travel accident insurance when you pay for your trip on their card.
- Some credit cards also offer free travel inconvenience insurance, which can provide help and compensation in the case of lost luggage and flight delays.
- Find out if your credit card offers an emergency card replacement service.
- Emergency card replacement services can get you a new card and emergency cash if your credit card gets lost or stolen while you are travelling abroad.
- Get a travel reward credit card.
- Travel reward credit cards offer you the chance to earn free travel including flights, hotels, holidays and car hire, just by using the card. So your next holiday could be on your bank!
