Credit Card Guides

Using credit cards abroad

When planning a trip abroad, credit cards can be very useful. You might use your card to fund all or some of the up-front costs of a holiday. But it’s worth bearing in mind that credit card use for some aspects of a trip is usually not ideal.

Why credit cards can cost money for a trip, and what to use instead (an overseas spending card)

There are several ways that a credit card can be a disproportionately costly method of payment when planning a trip or when abroad. Before you go you’ll usually want to withdraw money in the foreign currency. This is a bad idea with a credit card; you could be hit with an upfront fee from your card provider as well as the exchange bureau, and furthermore it counts as a cash withdrawal which means you’ll start paying interest on the sum immediately.

While abroad, credit cards also can incur costs. When paying for a product or service abroad, you should always choose to pay in sterling, otherwise you could be charged a conversion fee. When withdrawing cash with your credit card abroad, just as with a currency exchange you will usually be charged an upfront fee which can be a fixed amount or a percentage of the amount withdrawn, as well as another conversion rate on top of that. This can amount to 5% of the transaction in total for some cards.

The last cost to be aware of for cash withdrawal abroad is that of the interest accruing immediately, as with money exchange.

Advantages of credit cards abroad

Despite the costs, credit cards offer very useful benefits while abroad, they have extensive payment protection, and can be safer than using cash. Furthermore, they are another source of funds in the event of an emergency.

Overseas credit cards

Thankfully, there is a certain kind of credit card (overseas spending cards) that offers these advantages while minimising the costs involved. There may be lower conversion rates, and lower fees for using the card abroad.

Drawbacks of overseas cards

The same problem fees apply to cash withdrawals as mentioned above. Furthermore, overseas spending cards are often less competitive in terms of other features like balance transfer. But this can be said of all cards since they are almost always designed with a specific type of use in mind, and overseas spending cards are a great way to reduce the cost of your trip abroad if you use them to pay for products and services.

Prepaid cards

These cards work just like a topup card, and can be loaded with balance in a foreign currency. While they have their own set of fees (when applying for one, replacing the card, or when withdrawing money from an ATM) they can be quite handy when abroad and are certainly cheaper than using a conventional credit card. They circumvent the security concerns of carrying large amounts of cash abroad. They’re convenient and accessible, and a good option instead of or in combination with an overseas spending card.