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 1974, 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 consider – 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 purchases 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 – although be aware cash withdrawals will not usually benefit from this month’s grace.