Avoid international transaction fees or enjoy complimentary travel insurance with a credit card on your next holiday.
There are many ways for holidaymakers to take money with them on holiday, including credit cards designed for overseas use. These credit cards generally charge low or no foreign transaction fees, no currency conversion fees and no ATM withdrawal fees while offering travel-centric perks such as complimentary travel insurance, rewards programmes and airline lounge passes. But these cards aren’t entirely cost-free. As the best credit card for you will depend on where you’re travelling, your spending plans and your financial situation, you can use this guide to compare your options and find the right card for your needs.
Comparison of credit cards with no charge for overseas transactions
How to compare credit cards for overseas travel
With certain credit cards on the market specifically designed for overseas use, there are some important features you should compare to find the right one for you.
In your hunt for a credit card to use overseas, one of the first features to consider is international acceptance. Credit cards with affiliation to Visa or Mastercard find acceptance in most countries around the world, at ATMs and chip and PIN payment terminals alike. Acceptance of Diners Club and American Express cards is not as widespread and their use could attract higher fees.
Credit card fees
To understand how much your card could cost you, consider the following fees when comparing which cards to use outside the UK:
- Foreign transaction fees. When you make an international purchase using your card, your British pounds are converted to the local currency. When this happens, you’re usually charged a fee between 2% and 3%. If you want to avoid this fee each time you make a transaction overseas, consider a credit card that doesn’t charge a foreign currency conversion fee.
- Annual fees. If you have a card that’s designed for overseas use and it comes with extra features, it’s likely that it could also come with an annual fee. Before you apply, make sure the value you get from the card outweighs the cost. Some cards also come with no annual fees for a promotional period or for the life of the card, so you should also factor this into your comparison.
- ATM withdrawal fees. If you use your credit card to withdraw funds overseas, you might be charged a few different fees. Firstly, most credit cards charge a cash advance fee when you use your card for ATM withdrawals (whether you’re in the UK or overseas). As well as the cash advance fee, you’ll immediately attract the cash advance interest rate. Secondly, many banks charge an overseas ATM withdrawal fee when using your card for withdrawals outside of the UK. Thirdly, the local ATM provider might also charge a withdrawal fee. If you want to avoid this last fee, consider using a credit card that belongs to an ATM alliance.
If you’re travelling overseas, you’re going to have to organise international travel insurance. Using a credit card that offers complimentary insurance can help you save the time and money you’d otherwise spend on standalone cover. Depending on the card, the international travel insurance usually includes overseas medical insurance, transit accident insurance and travel delay insurance to name a few. The cover might also extend to your spouse or any dependent children travelling with you. As well as travel insurance, some credit cards offer purchase security insurance and extended warranty so you can shop with peace of mind. Complimentary insurance is often a feature of platinum credit cards, so make sure the feature is worth the cost of the card before applying.
Frequent flyer rewards
Using a frequent flyer credit card is an easy way to pick up reward points as you spend overseas. Depending on the card, you might be able to redeem these points for flights with a specific airline, accommodation with partner hotels, travel vouchers, cash back on your account or products from a rewards store. If your card is designed for overseas use, you could earn more points on foreign purchases. Compare frequent flyer credit cards with no foreign transaction fees to earn points without paying an extra cost overseas.
What should I be aware of when using a credit card overseas?
- Merchants or banks that offer to convert the currency for you. Once you’ve sorted yourself out with a card offering fee-free spending overseas, there’s one last crucial point to remember. Whenever you’re presented with the option to pay in the local currency or for the local merchant/bank to convert your funds to the local currency for you, choose to pay in the local currency (otherwise the it will be the local bank or merchant whose currency conversion fee structure will apply, rather than your card issuer’s).
- Adding funds to your credit card. There are certain people who add funds to their credit cards accounts before they leave for overseas, and they then make use of these funds through their card in the form of a debit card. By doing this, you can avoid paying interest. What you should know is that card providers don’t take any responsibility for funds you add to your credit card account. So, if your card is lost or stolen and used for unauthorised transactions, you might lose out on valuable funds.
- Consider other options. Using your credit card is not the only way you can spend money overseas. You can turn to traveller’s cheques and travel money cards, and you can even consider using a Mastercard or Visa debit card. In fact, it’s wise to organise more than one travel money option before travelling to ensure you’re not stranded without cash in case your card is lost or stolen.
- Excessive debt. A credit card may tempt you to overspend while on holiday. It’s important to remember that you have to repay everything you charge (plus interest in most cases), so make sure that you’re spending with a budget in mind so that your balance doesn’t get out of control.
What are the pros and cons of using a credit card overseas?
- Global acceptance. If you’re using a Mastercard or Visa credit card, you’ll be able to use your credit card in millions of locations around the world. American Express and Diners Club cards are also accepted worldwide, though in fewer places than Visa or Mastercard.
- Travel perks. Credit cards designed for overseas use often come with travel-related benefits such as frequent flyer rewards programs, complimentary insurance and airline lounge passes.
- Security of credit. When you’re travelling overseas, it’s wise to have more than one way to access your cash. Even if you have a prepaid card or debit card organised for everyday spending, a credit card can be used as a backup and the security of credit could come in handy in an emergency.
- Fees. Depending on the card, using your credit card overseas can come with many costs. Make sure you understand exactly what you’ll pay when using your card for foreign transactions before you apply.
- Limitations. Some cards come with limitations, including eligibility requirements, restrictions on how and where you can use the card.
- Temptation to spend. While a line of credit can provide you with peace of mind, it might also tempt you to spend money that you don’t really have. Remember that you’ll have to pay back everything you charge (plus interest if you don’t pay your balance in full).
As you’ve probably gathered by now, the ideal credit card you can use overseas is one that best suits your unique requirements. Given the many options on offer, it’s worth taking some time to compare a few.
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