Using a credit card abroad

Credit cards can be an easy way to spend money abroad, but spending overseas isn’t always as simple as taking your everyday credit card and carrying on as usual. Use your everyday credit card abroad and you can end up with hefty charges. Take out a travel-friendly credit card, however, and you can save hundreds on spending abroad.

Cash or credit?

One of the main things to consider before you travel abroad is how you plan to spend money when you reach your destination. In your home country, it’s common to use a combination of cash, credit cards and debit cards, however, spending money abroad requires planning ahead in order to avoid hefty charges and poor exchange rates. 

When it comes to spending, the main decision to make is whether to take foreign currency in cash, or whether to spend on a credit card abroad. There are advantages and disadvantages to  both spending options, so we’ve summarised the pros and cons of both cash and credit cards abroad to help you to make your decision.

Spending cash abroad

Pros

Although cash is increasingly disappearing from our everyday lives, there are still a number of advantages to using cash to spend money abroad.

Cash is accepted universally

When you use cash abroad, you have the comfort of knowing that you will be able to pay the bill wherever you go, without the need to check whether credit cards are accepted. Not all card providers are accepted universally, therefore spending cash can eliminate any question mark over your payment method.

No transaction fees

When you spend money on your everyday credit cards abroad, you can incur high transaction fees, which can quickly add up and cost you hundreds. Use cash to pay abroad and you can eliminate the risk of extra fees - this method ensures that you know exactly how much you are spending at all times.

Cons

Despite the positives, you should be aware of any downsides to using cash as your main method of payment when you travel overseas.

Cash is less secure

There are safer ways to spend money abroad than using cash, and carrying around large amounts of cash can be inconvenient. If you have your credit card stolen or lose your card abroad, you can contact your card provider and cancel the card quickly. On the other hand, cash can easily be lost or stolen, and it is far more difficult to reclaim cash than to replace a credit card.

Expensive exchange fees

When you buy foreign currency, you buy the currency at the exchange rate at the bank or kiosk on the day that you purchase the cash. This means that you will not benefit from any fluctuations in the exchange rate during your trip, whether beneficial or not. If you choose to withdraw cash when you arrive at your destination rather than in advance, be aware that the bank may charge a fee to withdraw cash from an ATM.

Paying with a credit card abroad

Pros

Credit cards can be a convenient way to spend money overseas. Using a credit card can provide you with more security and flexibility than relying on cash.

Credit cards offer protection

In the event that your credit card is lost or stolen during your trip abroad, it is fast and simple to freeze or cancel your card from anywhere in the world. Credit card providers also provide protection from fraud; your provider will signal any fraudulent activity on your account and contact you immediately.

Spending on a credit card is flexible

Decide to use a credit card abroad for spending and there will be no need to organise foreign currency in advance of travelling. An additional benefit of using a credit card is convenience - you only spend as much as you need and you can avoid being left with foreign cash at the end of your trip. 

Section 75

If you make a purchase while abroad using a credit card costing between £100 and £30,000 and the item paid for is damaged or not received, you can claim a full refund, thanks to Section 75 of the Credit Consumer Act 1974. 

Cons

Although the convenience of using a credit card abroad is appealing, there are a number of disadvantages to opting for this method of spending abroad.

Hidden transaction fees

When you use your everyday credit card abroad, it is common for card providers to charge non-sterling transaction fees. These fees are typically a percentage fee of the amount you spend during each foreign transaction and can add up quickly. Look out for fees for cash withdrawals on credit cards abroad too, as you can also be charged a percentage of the amount you withdraw from an ATM.

Credit may not be accepted

Remember to carry some cash when you are abroad to avoid being caught out. Although most large stores and hotels will accept credit card payments, your card may not be accepted universally, and cash may be required particularly when shopping at small or independent retailers.

How to use a credit card while abroad

Before you travel abroad, make sure that you are clear on your credit card terms so that you know what fees you will and will not be charged for. In order to avoid spiralling card charges, keep in mind the following tips when using a credit card abroad.

Avoid ATM withdrawals

Avoid withdrawing cash on your standard credit card where possible. When you withdraw cash, you may be charged a withdrawal fee as well as interest on the amount you withdraw - interest will be charged until you repay the amount of cash withdrawn. Use a debit card if you do need to withdraw cash; you may still be charged a fee, but you won’t need to pay interest.

Look out for transaction fees

Using your standard credit card abroad can be costly. Many lenders charge transaction fees on every purchase that you make on the card abroad, which can add up quickly. If you are looking for the best credit card to use abroad, consider taking out a credit card designed for overseas spending, which has no transaction fees or cash withdrawal fees.

Pay by card for added protection

When spending abroad, make high-value purchase payments on an overseas credit card and you will benefit from added consumer protection if something goes wrong.

You can save hundreds in credit card fees by choosing an overseas credit card instead of using your everyday credit card abroad. Travel credit cards are designed to make it easier and less costly to spend using a credit card abroad.

Things to consider before you travel 

There are a number of things to take into account when spending money abroad with a credit card which can help you to spend abroad without stress. 

  • Before you travel abroad, let your card provider know that you will be travelling and using your card in another country. Overseas transactions can be flagged as a suspicious activity, so unless your card provider is aware that you are abroad, you may find your card is incorrectly blocked and you cannot use the card.

  • When using a credit card abroad, always choose to pay in the local currency. Most card machines and ATMs will give you the option to pay in pounds or pay in the local currency. Pay in local currency and you will benefit from a better exchange rate, particularly when using an overseas credit card.

  • Always repay the card balance in full to avoid interest charges. Even the best cards to use abroad are still credit cards, and you will be charged interest on the card balance if you only make the minimum monthly repayment. Try to avoid cash withdrawals unless your overseas credit card terms include interest-free cash withdrawals.

  • Travel with a backup payment option. Avoid carrying around all of your cards and cash together, so that if you happen to lose your card or your wallet, you have an alternative back up method of payment during your trip.

Best credit card for overseas spending

If you choose to apply for a credit card to use overseas, look out for the following features:

No transaction fees

Many of the best credit cards to use abroad offer no transaction fees on all overseas spending. Look for a credit card with no transaction fees and you will not be charged any additional fees for using the card to spend money with retailers, hotels and restaurants during your trip. 

No withdrawal fees

There are overseas credit cards that offer no withdrawal fees on cash abroad. These credit cards will allow you to use an ATM without paying a hefty fee every time you withdraw local currency during your trip abroad.

No interest on withdrawals 

Another feature to look out for is no interest on cash withdrawals. However, be aware that the interest-free offer may only apply where the outstanding card balance is repaid in full. If there are no interest-free withdrawal offers available, look for a low-interest rate on cash withdrawals.

Best exchange rate

Using a credit card abroad can be costly even with no fees if you receive a poor exchange rate through your card provider. Look for an overseas credit card which gives you access to the best rates. This should be close to the rates that banks use to buy and sell currency amongst themselves, rather than a commercial rate.