How to Use a Credit Card Abroad

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Many people enjoy the peace of mind and security that carrying a credit card abroad can offer.

What many people don't enjoy however, are the hidden fees and charges credit cards tend to lump onto any differing usage they can - including use abroad.

It doesn't have to be all grey clouds and rain though... you can still trip to sunny Spain with your flexible friend and not feel it in the pocket on your return...

Read on to find out how.

Make the most of your card...

- Cut the cost of travelling abroad
Travelling or holidaying overseas often carries many hidden costs that fail to show themselves until you come home to find your monthly bank statement awaiting your arrival.

There are however many ways to cut these hidden costs and remove the despair of returning home to a big bill of fees and charges.

1. Use a debit card instead
• Using a debit card can eliminate some of the fees charged for accessing cash or purchasing goods and services abroad.
• Although some debit cards will still lever a foreign transaction fee, they usually have less charges for accessing cash, and obviously none of the interest rates charged for using credit cards.
2. Get a credit card offering commission free use abroad
• There are credit cards available on the market today that offer 'commission free usage abroad', or in other words, they do not charge a foreign transaction fee. Seek out these offers as they can reduce costs by around 2.75% for each transaction made abroad.
3. Get a credit card that's good for cash
• They can be a rarity, but there are credit cards that offer fee-free cash withdrawals and cheap interest rates for cash transactions.
• Also look for credit cards that include cash transactions as part of their interest free period - this will mean that if you repay your full balance at the end of the month you won't be charged interest for withdrawing cash or buying foreign currency.
4. Buy your foreign currency with cash before you catch your flight
• Although not always completely feasible for long trips, by far the cheapest way of purchasing foreign currency (avoiding the additional fees) is to withdraw the cash on your debit card in the U.K. and buy the foreign currency you need with cash before you journey abroad.

- Cash in on travel rewards
Travel reward credit cards are a great way to cut the cost of travelling - especially if flying around Europe (or the world) is a regular occurrence.

Travel reward credit cards will give you points each time you use the card to pay for goods or services - these points can be accrued and then redeemed towards free travel and travel related services - including flights, hotels, holidays, car hire and airport parking.

- Make use of free travel services
Many credit cards offer free travel perks or services when you pay for your trip with their card.

Although the actual offerings vary dramatically from card to card - a common service is travel accident insurance and travel inconvenience insurance.

There are credit cards that will even offer free comprehensive travel insurance - saving you around £10 for each trip.

Things to watch out for...

- Fees
Using credit cards abroad are pretty laden with fees; foreign transaction fees, cash handling fees - and of course, not forgetting the interest charges lumped on top if you don't repay your balance in full.

The main fees to watch out for are foreign transaction fees - charged on all transactions made in a foreign currency - usually around 2.75% of each transaction, but cards can be found offering 0% (free) foreign transaction fees.

Cash handling fees will also be charged whenever you withdraw cash or buy foreign currency on your credit card. Usually around 2% - 3%, and in addition to the foreign transaction fee when withdrawing cash abroad. These fees can again be avoided with the right credit card.

- No interest free period on cash transactions
The majority of credit cards only include purchases in their interest free periods. This mean that if you use your credit card for cash transactions (ATM withdrawals, foreign currency, etc...) you will be charged interest from the day of the transaction until repaid in full - even if you clear your balance in full each month.

Again, there are credit cards available that include cash transactions as part of their interest free period, - so if you repay your credit card balance in full on your return you'll avoid any interest charges for accessing cash.

- Dynamic currency conversion
A rather sneaky ploy quite out of the hands of any credit card company is dynamic currency conversion charges.

Whilst relatively avoidable, many overseas retailers may try and offer you the option to pay in pounds sterling instead of the local currency.

This may sound like a promising way to avoid the foreign transaction fee - however this method of payment - dynamic currency conversion - often carries a much higher 4% charge - almost double the foreign transaction fee of most credit cards.

By law, retailers offering this payment method are oblige to make it optional - but be aware of this ploy and always choose to pay in the local currency.

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