Why ordering a new credit card for your next holiday may be a brilliant idea

Harvey Jones says don’t leave it any longer to book a competitive credit and debit card for your next trip.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

There’s a lot to do in the final days before you go on holiday: double-check your tickets and travel documents, pack your bags and check in online, dig out last year’s flip-flops and alert neighbours that you’re going away.

Amid all this, you also have to work out the best way to take currency on holiday. Leave it too late and it could cost you dear.

Beware foreign charges

If you’re heading overseas, the simplest thing to do is to pack your existing debit and credit cards, and unpack them when you arrive. If they’re stamped with the Visa or Mastercard logo – and they almost certainly will be – you can use them in millions of shops, bars, restaurants, hotels and ATMs worldwide, as you would at home.

There is a catch, though.

At home, there are no charges to pay. It’s a different matter abroad. Once you step outside Blighty, most standard cards will impose foreign usage charges (also called non-sterling transaction fees) every time you use them.

Those foreign usage charges add up

Typically, cards charge a foreign usage fee of between 2.75% and 2.99%, adding around £3 to the bill for every £100 you spend abroad.

Worse, many add a flat-rate fee on purchases, which will add on between 50p and £1.

If you withdraw cash, then watch out. You can pay fees of around 2% of the amount you withdraw, often with a minimum charge of £1.50.

All these fees add up. Say you bought four family meals out costing £50 each, and made four cash withdrawals for £50 a pop. That could cost you £5.98 in non-sterling transaction fees for the food, plus £4 in flat-rate fees, and £6 in cash withdrawal charges. Total charges: £15.98.

It quickly adds up over the course of your holiday.

Order your card now

Personally, I think the best way of spending money abroad is to take out a credit card with zero foreign usage charges. I took out a card with Nationwide more than a decade ago, which is now free to use in Europe, although not the USA, and feel smug every time I use it. We’ve reviewed many of the top travel credit cards on our site, to help you choose from the many out there.

The important thing to remember is that it can take a week or two for a new card to arrive in the post. So book yours well in advance, before it’s too late.

App happy

There’s a new way to get fee-free foreign money, and that’s to take out a debit card with one of the new breed of app-based fintech challenger banks. Three stand out for holiday money: Monzo, Revolut and Starling Bank.

With the Monzo card, you can spend anywhere in the world, for free. It passes on the Mastercard exchange rate directly to you, with no fees or additional charges. You can withdraw up to £200 every 30 days at overseas ATMs, although there’s a 3% charge after that.

Revolut’s multi-currency card waives foreign transaction fees and exchange rate commission, and offers free ATM withdrawals. Its exchange rates are as tight as can be.

Similarly, Starling won’t charge you to use your debit card abroad and won’t add ATM fees either.

Be warned: local ATMs may add on their own charges for cash withdrawals, which can be punitive. So keep your eyes peeled.

The perfect combination

Whenever I go away, I pack my Nationwide 0% overseas usage credit card and my Revolut debit card. You might find that another combo suits you better.

I use my credit card for spending, because that gives me extra consumer protection on purchases between £1 and £30,000. However, I use Revolut for ATM withdrawals, to avoid the stinging APRs credit cards impose the moment you withdraw cash, both at home or overseas.

Holidays are coming. If it’s too late to order your cards for this trip, order your cards so they’re ready for the next one.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

MyWalletHero, Fool and The Motley Fool are all trading names of The Motley Fool Ltd. The Motley Fool Ltd is an appointed representative of Richdale Brokers & Financial Services Ltd who are authorised and regulated by the FCA, and we are permitted in this capacity to act as a credit-broker, not a lender, for consumer credit products (our FRN is 422737). The Motley Fool Ltd does not have permissions for, and does not advise on, investment products and services, but may provide information on investment products and services.

The Motley Fool receives compensation from some advertisers who provide products and services that may be covered by our editorial team. It’s one way we make money. But know that our editorial integrity and transparency matters most and our ratings aren’t influenced by compensation. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. The Motley Fool has recommended shares in Lloyds, Tesco and Barclays.

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »