Credit Card Directory

What's the best plastic to have in your wallet when abroad?

Updated Tuesday, 03 August 2010

What are the advantages and disadvantages of using different types of cards abroad and how do you know which is right for you?

It’s happened to all of us at some time or another. Having spent money on a holiday, you return home nicely bronzed only to find you’ve been stung with charges for simply using your cards abroad.

To avoid those post-holiday blues it’s time to sort out which card is best for you...

• Types of cards you can use abroad
• Credit cards
• Debit cards
• Pre-paid cards
• Other points to consider when choosing a card
• Our recommendation

Advertisement

Types of cards you can use abroad

When choosing which card to take abroad, you basically have three options: credit cards, debit cards and pre-paid cards.

With most providers offering adequate security should your card be lost or stolen, the main thing you need to look for is a card that reduces your additional fees.

In the following three sections we look at the advantages and disadvantages of each type of card.

Back to the top

Credit cards

Taking your credit card abroad with you is easy and, depending on your bill date, you probably won’t have to address your holiday spending until the following month. But be warned - you might be more likely to take cash out with your credit card if you get caught short whilst abroad, something that is best avoided unless you’re prepared to deal with the heavy fees attached by most providers.

Advantages:

• A minority of credit cards won’t hit you with a foreign exchange loading fee while on your travels, namely The Post Office Credit Card (www.postoffice.co.uk). However the Post Office will charge you 2.5% fee for cash withdrawals, plus interest - though it does allow you to buy your travel money from the Post Office without paying a cash advance fee.
• The innovative Halifax (www.halifax.co.uk) Clarity card, with an APR of 12.9%, promises no cash withdrawal fees and no fee to use it anywhere worldwide. But as with most credit cards, you will be charged interest if you take cash out.
• Thanks to “Section 75” consumer protection, if something goes wrong with your purchases (costing over £100), legally the card provider is jointly liable with the retailer, meaning you can complain to them and get a direct refund. Needless to say, this is much easier than tracking down the original shop on your return.

Disadvantages:

• Beyond the usual charges applied to withdrawing cash using a credit card, taking money from a foreign machine will typically sting you with an additional £3 charge or 2.5% of the amount, depending on which is greater.
• You’ll start to pay interest from the moment you withdraw cash at a higher than usual rate.

Find out more about credit card charges abroad

Back to the top

Debit cards

Given the extra charges generally added to credit cards abroad, the debit card may seem like the most obvious solution but things aren’t as clear cut as they may initially appear. While this type of card can be the best for your holiday, it will only be if you’re aware of the stipulations.

Advantages:

• Generally a cheaper option than withdrawing cash with a credit card, allowing you to take out cash without the same levies. You will be charged around 2% of your withdrawal though - which could add an extra £2-£5 each time you take cash out.

Disadvantages:

• Most providers will charge you each and every time you spend on your debit card. Among the main culprits are RBS and NatWest, each adding a £1.25 charge to every transaction while Santander applies a 2.75%. This will all add up over the course of your holiday.

Back to the top

Pre-paid cards

Not the most obvious choice, but pre-paid cards have some genuine advantages directly related to foreign travel. A leading example would be the Post Office Travel Money Card.

Advantages:

• A pre-paid card is one of the safest ways of taking your money abroad. You simply load money onto it, but it stays separate from your bank account, so that if it is stolen your bank account is safe.
• With the Post Office Travel Money Card, if it’s lost or stolen you can request a replacement 24 hours a day, seven days a week, therefore limiting a disruption that could ruin a holiday.

Disadvantages:

• Most pre-paid cards incur a 2.75% fee to use abroad in addition to a 1.5% commission for loading GBP onto the card (although this is 0% for EUR and USD).
• With the Post Office's Travel Money Card, the emergency replacement service will cost you £35.

Read more about pre-pay credit cards.

Back to the top

Other points to consider when choosing a card

It’s important to remember that all cards can face charges that may be hidden on your statement. Most banks will levy a loading fee on all foreign currency transactions, usually 2.75%.

All card types are liable to face a “dynamic currency conversion” on purchases, meaning that some retailers will apply their own conversion rate when turning their native currency into GBP. This is often hidden and generally offers a poor exchange rate - certainly something to be aware of when spending on all cards abroad.

Back to the top

Our recommendations

Although getting a pre-paid card can make sense if you are worried about losing your card, you won’t get the Section 75 protection. So if you will be making purchases worth over £100, it may be wiser to stick with a credit card.

With this in mind, the Halifax Clarity card is a great choice. With a reasonable APR of 12.9% and no fees to use your card abroad or even to take cash out while you're on holiday. The Post Office card is also a good option.

Back to the top

Comments