Travel credit cards offer some of the perks and rewards of a normal credit card, plus a number of travel-related benefits. Most notably, travel credit cards offer completely fee-free foreign purchases – and some of the best foreign exchange rates, too.
If you travel a lot and want to use a credit card for foreign purchases, or taking cash out of a foreign cash machine, a travel credit card can be one of the best credit cards to own.
Why you should get a travel credit card
The best way of illustrating why you should get a travel credit card is to explain why you shouldn’t use a normal credit card while travelling.
Here’s a list of the fees and charges that’ll normally be levied against you for using a credit card or debit card while on holiday:
- A fee for every non-sterling transaction – usually around 3%. So, if you spend the equivalent of £100 abroad, it’ll appear as £103 on your statement.
- A fee for every cash machine withdrawal. This could be a percentage of the amount withdrawn (around 3%), a flat fee (£1.50 to £3), or both.
- Immediate interest charges on foreign purchases and cash withdrawals, even if you pay off your card as usual.
Dedicated travel credit cards will waive most or all of these fees, which can result in big savings (hundreds of pounds per year) if you travel a lot.
Can you get a travel credit card?
Travel credit cards don’t have particularly strict eligibility criteria, and there’s a large enough range of travel cards that you should qualify for one even if you have a poor credit history (or no credit history at all). As always, try to use a a ‘soft’ eligibility calculator that doesn’t leave a footprint on your credit record before applying for a travel credit card.
You probably shouldn’t use a debit card abroad
The best debit cards charge around 3% for foreign purchases and a fee for cash withdrawals, which is mostly inline with a conventional credit card.
Some debit cards, however, charge a flat fee for every foreign purchase plus the usual 3% foreign transaction fee. The TSB debit card, for example, will charge you £1 for a foreign purchase, even if you’re just buying a bottle of water. If you use that debit card for a week of holidaying, you could easily rack up £100 or more in charges and fees.
There are dedicated travel debit cards, but a travel credit card is usually better unless you’re withdrawing cash to pay for stuff rather than paying directly with plastic. A travel credit card comes with Section 75 purchase protection, too, which is particularly useful if a product turns out to be faulty after you return home.
If you can get one, you should definitely consider picking up a dedicated travel credit card instead of using a debit card abroad. The main exception is if you can’t pass the credit check for a travel credit card – in which case a current account with fee-free foreign purchases is your best bet.
Travel credit cards: Things to watch out for
Always pay in the local currency. If the hotel, retailer, or restaurant asks if you want to pay in pounds or euros (or whatever the local currency might be), always pick the local currency. If you choose pounds, the retailer will do the currency conversion, and the rate will nearly always be worse than letting your card issuer handle it. Visa, Mastercard, and Amex get exchange rates that are very close to the ‘perfect’ rate, which can save you hundreds of pounds over the course of a holiday if you make some big purchases.
Always pay your credit card bill in full every month. As with every credit card, if you don’t pay off your travel credit card in full every month, the interest charges will quickly wipe out any gains from fee-free foreign purchases. Set up a direct debit to pay off the card in full – and, if it has been more than a year since your last holiday, be aware that your bank may remove any direct debits after 13 months of dormancy.
A travel credit card is one of the cheapest ways to spend money abroad. Fee-free foreign transactions, plus the near-perfect exchange rate, mean that a travel credit card is almost unbeatable for spending money abroad. Changing money with a specialist foreign exchange bureau is the only other method that gets close – but then you need to walk around with lots of cash, and it’s hard to know ahead of time exactly how much money you’ll need.
Travel credit cards can have other perks, too. It’s not unusual for a travel credit card to also offer rewards, cashback, or 0% on purchases. These perks are nice to have, but don’t let them sway your purchasing habits too much: a dedicated 0% purchase card or reward credit card will probably serve you better.
Travel credit card FAQ
What is a foreign transaction fee?
Also known as a ‘foreign purchase fee’, this is the charge made by your bank every time you make a purchase with your credit card when you are abroad. Typically this is around 3% of the total cost of the transaction, but on many dedicated travel cards there’s no fee at all. It should be noted that taking money out of a foreign ATM is different to a ‘transaction’ in this sense, with different applicable fees and charges – though some travel cards do waive the ATM withdrawal fee, too. If you do withdraw cash, remember you will be charged interest from the moment you take it out. You should always check out the particular terms and conditions of your preferred card before you travel, so that you know what to expect.
The travel card I want charges a fee – is it worth it?
It can be, but you may have to do your homework. If the card you are considering awards points for all your credit card spend which you can then redeem for flights or travel-related benefits, it may be worth it if you use your credit card as often as you can. But remember: you must always, always, always pay off your balance in full every month, or the interest payments will quickly wipe out any points or miles you might’ve earned. Conversely, if your travel credit card only offers benefits when you are actually abroad – no foreign transaction fees, for example – and you only holiday once or twice a year, paying a fee for the remaining 11 months may not be a savvy move.
When purchasing abroad, I am asked if I want to pay in Sterling or Euros – what should I say?
Euros! If you say you want to pay in Sterling, the merchant will apply their own exchange rate (this is known as ‘dynamic currency conversion’ and is often unfavourable) – but if you pay in the local currency, your card issuer will apply the exchange rate, which is usually much better.
Do I have to tell my credit card provider I am going on holiday?
Some credit (and prepaid) card issuers do need to know your holiday plans so that they can activate your card for overseas use, and ensure that any card activities are not stopped due to fraud suspicions. To avoid any holiday disasters then, and for peace of mind, it is always advisable to tell your provider when you are going away and to where. This can often be done via online or mobile banking, which is relatively painless.
Are there any alternatives to a travel credit card?
Yes, there are a wide range of prepaid travel cards available, which offer a wealth of benefits and rewards to travellers, including a potentially more favourable exchange rate, free foreign transactions, free ATM fees and cashback on worldwide purchases. These cards need to be pre-loaded with money before you can use them, but once loaded they can be used just like any other debit or credit card, wherever you see the Mastercard or Visa logo. Perhaps the best thing about prepaid travel cards is that often you can lock in an exchange rate before you travel – so you know exactly how much of the local currency you have to spend.