Credit Card Guides

Guide to using credit cards abroad

An introduction to using credit cards abroad and their benefits:

When planning your holiday, the first thing that’ll be on your mind is making sure everything goes smoothly from a budgeting and payment perspective. A credit card can be of great benefit, and provide extra options for your trip.

One of the obvious benefits of a credit card is that it simply gives you another payment option – it’s always best to have an extra safe source of funds while you’re away. But on top of this, credit cards can give other advantages over other methods like cash and debit card.

The main advantage a credit card offers is payment protection – under Section 75 of the Consumer Credit Act, if any purchase between £100 and £30,000 is made in whole or in part with a credit card and the goods or services turn out to be unsatisfactory or not what was advertised, you can ask for the money back from your card provider (who will then try to get a refund from the supplier of the goods or services).

Another advantage over cash is that if the card is stolen or lost you can have it cancelled immediately and get a new one sent out, usually quite quickly. This gives extra assurance that you’ll always be financially covered when abroad.

And obviously, credit card are quite handy, often easier than carrying around cash.

If these advantages seem worthwhile and you’re shopping around for a card, it’s worth mentioning also that some cards are particularly suited to use while traveling. Travel credit cards have less foreign charges and fees, which can be a drawback with standard cards as we’ll see, and some also have perks like air miles which can be a big advantage.

With the pros of traveling with credit cards in mind, let’s take a look at some of the things to be wary of:

Fees for using your card abroad

One of the biggest drawbacks to using your card abroad is the fees associated. Without taking foreign exchange or anything else into account, card providers charge up to 3% on any purchase while abroad. This can really add up over the course of a trip, there’s no point in making your holiday 3% more expensive if it can be avoided. This fee can be named differently depending on the provider, so have a look at the Terms and Conditions to see what the policy is (it is usually called a Foreign Transaction Fee or a Non-Sterling Transaction Fee).

Charges associated with using your card abroad

Then there are general charges for making transactions abroad in other currencies. When making a purchase, there is often the option to pay in local currency or sterling. You should always choose the local currency. The merchant or the card company might charge for conversion if you choose to pay in sterling.

Charges also apply to cash withdrawal when abroad. This poses problems from two angles. Firstly, if you use your card to take out cash then the credit card provider will often charge around 2% on the price of the transaction. Secondly, there is the issue of interest. Unlike most other transactions which you don’t have to pay interest on if your balance is cleared within a month, a cash withdrawal will start incurring interest immediately.

Charges can apply for money conversion, too. It’s best to use cash or a debit card when dealing with the exchange bureau (ID will be necessary if using your debit card). You will often be charged by the exchange bureau for using a credit card. You will probably often be charged by the card company too as they might consider the transaction a cash withdrawal, and the same charges will apply as mentioned above.

What are the other options?

So using credit cards abroad has its pros and cons. In addition to credit card considerations, it’s worthwhile looking at the other options available that can be used instead of (or as well as) a credit card, to make financing your trip go smoothly.

Aside from travel cards mentioned earlier, some debit cards don’t charge for taking out money overseas. Even if they do, this method can also be used to avoid the interest charge involved with taking out money with your credit card.

Another option is prepaid currency cards. This can be a good option if you lack the credit score for a card that s good for use abroad. They are a cheaper way to spend while away since you can load your balance with a foreign currency and then spend it later. Unfortunately, in some cases the provider will have fees and charges for the transactions so try to be aware of those terms before using one.

Then there s the straightforward option of buying the local currency before you go or while in your destination country. This can be a simple and easy option, and if you get a good exchange rate you can at least be sure that you’re avoiding high charges. Another advantage is that you know up-front exactly what it will cost, and you won’t have anything like interest or unexpected charges or fees to deal with later.

Research is your best tool for making a good decision about funding your trip with a credit card. You might find that it’s best to pay for the trip with a credit card, and use your debit card and cash while you’re away (and have the credit card just in case). Or you might find that a travel credit card provides the best value. There is a range of online tools to check things like exchange rate options, terms and conditions of different cards compared, and how likely your credit card application is to be accepted.