Smart traveller: Using credit cards abroad

31 Jan 2019 by BusinessTraveller
Credit cards (iStock)

Most frequent travellers know the basics about spending overseas – withdraw cash in decent-sized amounts, don’t change money at the airport unless it’s an emergency, and look for a credit or debit card with good transaction rates.

Still, according to research by fintech company Centtrip, UK businesses waste billions on foreign-exchange fees each year, with employees losing out on as much as £51 million by not including currency conversion costs when submitting expenses.

The amount you pay overseas is based on the exchange rate set by Mastercard, Visa or American Express, plus the additional fees your bank or the ATM adds.

When using a credit card, it is important to look out for how much you’re being charged in foreign transaction fees on purchases (which can be variously labelled non-sterling transaction charges, conversion fees or loading fees). On both credit and debit cards, these can be up to 3 per cent, creating a fair bit of additional spending over the course of a trip.

Also pay attention to the fees that your bank slaps on when you take money out of an ATM, which are generally hefty with a credit card. These can include a cash withdrawal fee, foreign usage fees and interest.

Santander All in One, Halifax Clarity, Nationwide Select, Barclays Platinum, Aqua Reward and Tandem Cashback are all cards with no foreign transaction fee.

But while you usually only pay interest if you don’t clear your bill in full at the end of the month, when the money is spent overseas some cards will immediately charge you interest, often at high rates. Halifax Clarity, Halifax FlexiCard and Barclays Platinum Cashback Plus all stand out as credit cards that won’t charge interest from the day of transaction if you do need to take out money.

Other options

An increasingly popular option for accessing money overseas is a prepaid card, such as Virgin Money Prepaid Travel Mastercard. In this case, you choose a US dollar or euro card and top it up with that currency before you go, thus negating transaction fees (although ATM withdrawals incur a charge of US$2 or €1.50 and the exchange rate will be dictated to you).

You could also consider new technology. Transfer Wise offers debit cards for a free “borderless account”, which lets you hold money in 40 different currencies. Currency is then exchanged at the mid-market rate with no extra fees.

The We Swap Mastercard provides low fees by exchanging money between users rather than buying currency in the FX markets. Users convert the money on their card into their desired currency in advance and then spend using the currency while abroad. However, it can take longer to get your money unless you pay a higher fee, and the lowest rates are only available in 18 core currencies. A big drawback for some will also be the annual spending limit of £12,000 and that you are limited to a maximum of 15 transactions and two ATM withdrawals a day.

Other financial upstarts such as Monzo and Starling Bank are popular with a young audience, but their smartphone-led approach could have benefits for travellers of any age. They offer current accounts and aim to make spending as transparent as possible, with easy-to-use apps that send an instant notification whenever you make a purchase and provide clear breakdowns of where you spent your money over a given period.

Traditionalists may be put off by the quirky design. More tempting might be free overseas withdrawals up to £200 every 30 days, no conversion fees, a promise to pass on the base exchange rate and an easy way to block your card on your phone if it is lost or stolen.

Curve offers cards and an app that let you put all of your accounts in one place, so you can choose which to use with each purchase. If you choose to pay with the wrong one, it lets you go back and charge it to another. You get real-time updates on your spending in each currency, and the card provides cashback and no foreign transaction fees.

More money saving tips

  • Select payment in the local currency when paying by card, to avoid being charged extra by the vendor for the conversion
  • When buying currency, remember to use a debit card or cash, as credit cards see it as a cash withdrawal and charge a withdrawal fee
  • Weigh up whether you’d get more back from a card with cashback, such as Santander All in One, a rewards card such as Sainsbury’s Dual Offer, or your preferred airline card with the best return on points
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