The best credit cards for travel

Travel credit cards explained

If you’re going abroad, make sure you have everything you need. Suitcase packed? Passport at the ready? Travel insurance arranged? Most importantly, do you know how you’re going to pay for everything while you’re away? Whether you travel for work or pleasure, a travel credit card might be the ideal way to pay while abroad – provided you can pay it off as soon as you step back on British soil.

On this page:

1. What are travel credit cards?
2. What makes them different from ordinary credit cards?
3. Should I pay in pounds or euros?
4. Travel credit card versus prepaid travel card

What are travel credit cards?

With most credit cards, you are warned to avoid using them abroad, because they tend to charge hefty fees for foreign usage. That’s why some providers offer a credit card with little or no charges for using abroad as a welcome alternative for the frequent traveller.

These special travel credit cards allow you to pay for everything while you’re abroad with a lower fee for foreign usage. The best credit card for travel may even charge no fee at all. Of course, there may still be a local cash withdrawal fee to pay if you use an ATM abroad, and you may also be charged for spending on your card in stores, but this would be unavoidable with any card.

You may then ask, why use a card at all? Well, taking cash tends to be a lot less safe, given that it can be lost or stolen. It’s easier to block a credit card than it is to prevent someone from spending your stolen notes. Cards are also useful if you end up spending a bit more than expected, as it means you won’t run out of money so easily.

Additionally, travel credit cards are regulated by the Financial Conduct Authority and offer the same Section 75 protection on purchases between £100 and £30,000 that other UK credit cards do. This means that, thanks to the Consumer Credit Act, you can apply for a refund from your card provider if your purchase turns out to be faulty, so you won’t have to rely solely on a foreign seller giving you your money back.

Note that there may be different percentage charges on purchases and cash withdrawals, with cash withdrawals usually costing more than purchases. You may also be charged differently for going to the EU compared with somewhere further afield, so make sure to check the small print so you know what the charges will be.

There’s also the matter of exchange rates to take into account – by using your credit card, you won’t be able to take advantage of the most favourable currency exchange rate available in the months before you travel. Instead, your spending will be converted using the exchange rate at the time of purchase/withdrawal. For this reason, a combination of travel money and a travel credit card might be ideal.

Remember though that you will still have to pay interest on your spending no matter where you use the card, and unless you find one with an introductory 0% purchase term, you’ll typically be charged interest every time you use the card abroad. That’s why it’s so important to find the best credit card to use abroad and pay off the balance as soon as you can – consider setting up a standing order so you can be sure that you’ve repaid the balance before the month is up and interest can be charged.

What makes them different from ordinary credit cards?

In many ways, travel credit cards work just like other credit cards. You will need a good credit score to be accepted and get the best possible rate, which may differ from the representative APR, and you will have to make a minimum payment every month once there’s debt on the card. But whereas ‘regular’ credit cards tend to charge high fees for use abroad, the opposite can be said for credit cards for travelling abroad.

Foreign usage charges on these cards tend to be lower, and the best credit cards for travel may even charge nothing at all. Indeed, the only common factor in the Best Buy chart above is the foreign usage charge (or lack thereof), so the cards could have wildly varying benefits, fees and charges. Some may offer cashback or a 0% interest term on purchases/balance transfers, while others may be quite basic.

If you’re looking to make purchases in the UK as well as abroad, you might therefore be better off getting both a low interest credit card and a travel card. And if you come back from holiday with a lot more on your travel credit card than you’d expected, you could consider switching the debt over to a 0% balance transfer credit card to minimise the interest charged (though you will likely have to pay a balance transfer fee, so be careful when considering your options).

Should I pay in pounds or euros?

Wherever you are in the world, it’s generally considered to be cheaper to pay in the local currency rather than pounds. So, if you’re in a country that uses the euro, and an ATM or restaurant asks you whether you’d prefer to complete the transaction in pounds or euros, it’s safer to pick euros.

When you choose to pay in euros, your own bank or credit card provider does the currency conversion, whereas if you pay in pounds, the bank behind the ATM or restaurant does the calculation. The conversion rate behind this can be quite a bit higher than the transaction fee that your own bank may charge for paying in euros, making it more expensive to choose sterling in most cases.

Travel credit card versus prepaid travel card

Aside from a regular or travel credit card, or simply using your debit card, there’s another option you might want to consider. Prepaid travel cards, like regular prepaid cards, allow you to add funds from various sources and won’t let you spend more than you put on the card. And like travel credit cards, they offer you competitive charges for using the card abroad.

Unlike a travel credit card, however, prepaid travel cards allow you to choose to convert your pounds into euros or dollars when you add the money to the card, rather than when you use the card abroad, which can allow you to take advantage when the exchange rate is at its best. Some cards will even allow you to put multiple types of currencies on them. You’ll have to check carefully to see if the prepaid travel card you want offers any different currency option.

However, prepaid credit cards also have their downsides compared to travel credit cards. For one, you wouldn’t be able to spend even just a little bit extra – once the prepaid card is ‘empty’, you’ll have to put more money on it before you can use it again, which could be laborious or even impossible while you’re still abroad.

Another potential downside is the charges that may come with these prepaid travel cards. Aside from the foreign exchange fees, which both kinds of cards may or may not have, there may be additional transaction fees, ATM charges and a fee just for getting the card.

Whether you choose a prepaid travel card, a travel credit card, or would rather just risk the foreign transaction fees attached to using your regular debit card, always compare the market so you can be sure that you have the best (credit) card to use abroad. You shouldn’t have to add 10% or more to your travel budget just to pay for card charges. And if you do pick a credit card for your travels, try to clear the balance in full as soon as possible to keep your costs further in check.