No foreign transaction fee credit cards

Using your credit card to travel but want to avoid a surprise on your bill when you get home? Here’s our guide on everything you need to know about no foreign transaction fee credit cards.

Credit cards are synonymous with travel because they can be used in almost every country in the world. Their ease of use, however, hides the fact that credit cards can become very costly travelling companions if used poorly. 

The way to combat this is to become savvier about the credit card you take with you. ‘No foreign transaction fee’ credit cards are a good place to start.

What is a foreign transaction fee?

A foreign transaction fee is a surcharge on your bill that is added when you make a purchase that passes through a foreign bank or in a currency other than GBP. This is usually around 3% the total cost of the transaction. 

As you can imagine, this can make travelling whilst using your credit card a very expensive experience indeed. So, how can you avoid foreign transactions fees? With a no foreign transaction fee credit card!

What is a no foreign transaction fee credit card?

A no foreign transaction fee card is exactly as it sounds: a credit card that doesn’t apply a fee for foreign transactions. The key, though, is understanding what constitutes a ‘transaction’. In this context, a transaction is any time you use your card to make a purchase. You might fairly assume that it’s also free to withdraw cash from a foreign ATM with such a card, but this is almost never the case. There is usually a cash advance fee and a minimum charge applied, regardless of how much you withdraw. Sometimes an enhanced APR rate is payable, and payable immediately.

The ‘no foreign transaction fee’ offered by credit card issuers is almost always offered with the stipulation ‘when made in the local currency’. It is important to remember that when you use your credit card abroad, and you are asked whether you want to carry out the transaction in sterling or the local currency, that you choose the latter. If you choose sterling, the merchant will not only apply their own (less favourable) conversion rate, but you’ll also be smacked with a fee from your credit card issuer.

Section 75 purchase protection – for goods and services valued between £100 and £30,000 – can be extremely useful when travelling abroad, as it’ll likely be much harder to return faulty goods once you’re back home.

What is the best no foreign transaction fee credit card to use when travelling abroad?

Not charging a foreign transaction fee is just one of many benefits that a credit card issuer can offer you. Some no foreign transaction fee cards can also be used as a balance transfer card or cashback card. However, you should watch out for surprise fees and charges that can quickly wipe the benefits from shopping easily abroad.

When choosing a no foreign transaction fee card, you should always check out the other perks that might help you on your travels or at home – and be aware of some particulars which can easily be overlooked.

Other possible benefits of no foreign transaction fee cards

  • 0% interest on balance transfers, money transfers or purchases

  • Cashback

  • No fee when buying travel money

  • No fee to withdraw cash from an ATM (at home and abroad)

  • Discounted branded goods or services

  • Loyalty scheme points and rewards

  • Airmile points or other travel-related freebies or discounts

Things to consider

  • If you are looking for a credit card solely for travelling abroad, check out the range of dedicated travel credit cards. These often offer multiple benefits for the globetrotter that may be useful, beyond simply the free foreign transactions.

  • Look at the APR of any card you are considering. If you do have to leave a balance to pay off over time, it’s good to know how much interest you’ll be paying.

  • Check out how much you will be charged for taking out cash from an ATM abroad using your credit card, as the difference between cards can be quite astonishing. This is not only the case with credit cards, but debit cards too can incur some nasty surprises when you use them abroad. For example, a ‘spending fee’ of around £1-£1.50 every time you use your card abroad, on top of the foreign purchase fee. Always check the terms and conditions of your credit and debit cards in good time before you travel.

  • Remember to pay off your credit card balance in full at the end of every month. If you don’t or can’t, it will probably wipe out any of the free foreign transactions you enjoyed.

  • If you do have the means to pay off your credit card balance in full every month, but are still looking for a card which you can use everywhere for free, perhaps consider a peer-to-peer travel prepaid card. Bear in mind though that a prepaid card needs loading first and does not offer the Section 75 legislation cover.

No foreign transaction fee credit card FAQ

What is considered a ‘foreign transaction’?

In the world of credit card language, a foreign transaction is any purchase made using your credit card outside the UK. It is extremely important to note that cash withdrawals are not considered a ‘transaction’. This means that cash withdrawals are charged completely differently, sometimes with an enhanced APR, often with a cash withdrawal fee (typically around 3%), and is almost always interest-bearing immediately.

Are these cards only good for foreign travel?

Not necessarily. Credit cards which offer no foreign transaction fees can often offer other useful benefits such as cashback (generally on purchases made in the UK), 0% on balance transfers, purchases, and/or money transfers, or discounted retail offers. It makes sense to consider these other offers carefully so that you can make full use of your credit card even when not holidaying abroad.

Should I pay in Sterling or the local currency?

When you make a purchase abroad with your card, particularly in Europe, you are often asked by the merchant whether you would like to pay in euros or pounds. If you say pounds, the merchant will apply their own exchange rate, which almost always converts at an unfavourable exchange rate. Therefore the answer to the question is ‘the local currency’ because then it will be your card issuer who will apply their own exchange rate (which is the lesser of 2 evils).

Do I need to tell my credit card provider that I am going on holiday?

Some issuers will need to know when and where you are going away so that they can activate the card for foreign use. This ensures that any foreign activity on your account does not raise any red flags at their end, which can result in your account being frozen. Not all issuers need to be alerted, but it’s always a good idea to get in touch and check. Being stuck without money in a foreign country can be pretty awkward…

Are there any other travel cards available?

Yes. There are a wide range of credit cards available which are specifically designed for the traveller. Some offer free ATM withdrawals, cashback on your worldwide purchases, fee-free foreign exchange etc. There are also some specialised airmile cards that offer reward points, which can be redeemed for flights, holidays, discounted car hire, concierge services and more. If you are looking for something entirely separate for your holiday spending, you could check out the range of prepaid travel cards on offer. The exchange rate tends to be more favourable than high street banks, and these cards are accepted everywhere you see a Mastercard or Visa logo.