Guide to Travel Credit Cards

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Travel credit cards operate as credit cards but don’t carry a fee abroad. Our guide to travel cards will break down everything you need to know to decide if a travel credit card is right for you.

What is a travel credit card?

Travel credit cards are cards that do not carry a fee for use abroad but still operate as standard credit cards in the UK. The main difference with a travel credit card is that they do not have that non-sterling transaction fee, which means you pay less while spending abroad.

Typically, credit cards carry a charge for ATM withdrawals, which could be anything from 2.50% to 2.99%. But some travel credit cards have no fees for cash withdrawals made abroad and often waive the cash advance fee for withdrawals made outside the UK.

While some of our favourite credit cards for travel are actually called ‘travel’ cards by the credit card issuer, not all of them are. In fact, some of our top picks for spending abroad are not labelled ‘travel’ cards, but are simply great all-round type cards that also have no non-sterling transaction fees.

How does a travel credit card work?

What’s great about travel credit cards, is that there’s nothing particularly special that you need to do to get the main benefit of no foreign transaction fee.

Here’s the main thing you need to remember when travelling: Pay as you normally would, in the local currency. That last bit is critical. Often, merchants in other countries will give you the option of paying in sterling. If you have a travel card, don’t do it. Choose to pay in the local currency.

While it may seem nice that merchants would offer the option to pay in sterling, the exchange rates they give you usually aren’t very good. When you pay in local currency, your bank will exchange at the network’s exchange rate (that is, the wholesale exchange rate for Visa, Mastercard or American Express, depending on your card type). And those exchange rates tend to be very good and very close to the ‘spot’ exchange rate.

This works similarly if you’re overseas and take a cash advance at an ATM. If you take out local currency from that ATM and have a travel card that doesn’t charge a foreign currency fee on cash advances, then you’ll get that currency without an added fee on top.

When you have this fee-free cash advance option open to you, it can be a helpful option in a pinch. But only in a pinch. Here’s why: When you pay for a purchase with your credit card, you don’t pay any interest on that amount as long as you pay off your balance at the end of the month. But if you take out a cash advance, you start paying interest on that money right away. So, if you have a travel card with no non-sterling transaction fees on cash advances, then you may not have to pay fee for your ATM withdrawal, but you will end up paying interest.

Fees on travel credit cards

There are three main types of charges that may apply when using a travel credit card:

  1. Non-sterling transaction fee – This is a percentage of each transaction, often up to 2.99%. However, most specialist travel credit cards waive this fee.
  2. Non-sterling cash fee – You will often pay a fee of around 3% when you withdraw money from a cash machine.
  3. Interest on cash withdrawals – When using a credit card – even a travel credit card – you will usually pay interest on cash withdrawals, which can be at a much higher rate than the interest on purchases.

Types of travel cards

There are three main types of travel cards. They are:

Airline credit card

An airline credit card is a type of travel credit card that allows you to accumulate airline miles and other rewards with a particular airline every time you use the card to make a purchase.

Hotel credit card

With a hotel credit card, you earn points when you use the card for purchases. Points can be exchanged for free nights in the hotel chain, discounted rates and upgrades, and often the opportunity to climb the ranks with the hotel’s loyalty scheme. Also, most hotel credit cards add on bonus points for transactions in some spending categories, such as hotel spending, dining, or airfare.

Prepaid travel card

While not a credit card, a prepaid travel card is a card that you pay money onto prior to your travels, and then use for your holiday spends. Prepaid travel cards allow you to carry less cash and, unlike a credit card, there is no risk of overspending or accumulating interest on debt.

Please note that prepaid travel cards do not offer protection under Section 75 of the Consumer Credit Act. This means that if you don’t receive something, or the item is faulty, or the company you’ve bought from goes under, your prepaid card provider is not jointly responsible with the retailer.

What rewards can I get with a travel credit card?

The rewards depend entirely on the travel card you select. Some travel credit cards offer nothing beyond having no foreign transaction fees, but several cards on the market offer something for your spending.

  • Cashback cards – These cards offer you cashback as a percentage of how much you spend. For example, a card might offer 0.5% cashback on your spending. Therefore, if you were to spend £100, you would earn yourself 50p in cashback. The thing to check with travel cards that offer cashback is whether there is a cap on how much cashback you can earn over a period of time.
  • Reward cards – These cards offer you reward points for your spending that you can then convert into spending or perks with specific companies. With schemes such as this, just be aware of any spending requirements in order to earn the points, and whether the card carries an annual fee.
  • Travel discounts – Some travel cards offer travel discounts as part of their package. This could be anything from discounts on holidays with a specific travel operator to money off travel insurance policies.

The benefits of a travel credit card

Whether you travel for business or are just looking for some R&R, using a credit card abroad can be a convenient way to manage your overseas spending. But what are the real benefits of choosing a travel credit card over a standard credit card?

  • No foreign transaction fees – This is the big winner with a travel credit card. It means that you can use your card abroad without any additional fees piling on. While 3% may not sound like much, when you do the math across all your spending while on holiday, it really adds up!
  • Rewards when you spend – Some travel credit cards offer additional rewards such as cashback, travel discounts or vouchers based on your spending. Combine that with no foreign transaction fees, and you’re earning on your spend whether at home or overseas.
  • Preferable exchange rates – The exchange rates offered on travel credit cards are typically competitive, and almost always better than the rate that an overseas merchant or exchange office will offer.
  • Protected purchases – Using your credit card to make purchases means that anything that costs between £100 and £30,000 is covered under Section 75 of the Consumer Credit Act. This means that if you don’t receive something, or the item is faulty, or the company you’ve bought from goes under, your credit card provider is jointly responsible with the retailer. Please note that prepaid travel cards do not provide protection under Section 75 of the Consumer Credit Act.
  • Fee-free cash withdrawals – To be clear, we generally don’t recommend getting cash advances from credit cards. That’s because you start getting charged interest as soon as you pull that cash out, and often face cash advance fees. But if you’re overseas and in a pinch, a travel card that doesn’t charge additional fees for withdrawing cash from an overseas ATM can take some of the sting out of grabbing some emergency cash.

Potential disadvantages of a travel credit card

While travel cards may seem like the most sensible option if you’re planning to go away, there are still things you should be aware of before you apply.

  • You may not be accepted – Not everyone is guaranteed to be accepted for a credit card, and travel cards typically require you to have a ‘good/excellent’ credit score.
  • High interest rates – Many travel credit cards have higher APRs. If you do not pay off your balance each month, you will incur interest charges, and the higher APRs could potentially erase any savings you’ve made with the fee-free card. Additionally, any cash withdrawals made abroad that sit on your balance will also be charged at the card’s cash advance APR, and will start accruing immediately.
  • Annual fees – We’ve tried to select cards that do not carry an annual fee. Some travel cards that offer higher travel rewards do, but sometimes require you to pay an annual fee.
  • Sterling transactions – You may be charged fees by the retailer if you do not use the local currency when using your card abroad. If you were to make a sterling transaction with a foreign retailer, that retailer may charge you a transaction fee to cover the cost of converting sterling into the local currency. Therefore, be sure to always make purchases or withdrawals in the local currency.
  • Card acceptance – While Visa and Mastercard are widely accepted worldwide, there may be some places where cards in your card network will not be accepted and therefore your card won’t work. It is best to have some sort of backup when travelling, so in addition to your travel credit card carry some cash in the local currency, traveller’s cheques or a debit card.

Which credit card is best for travel?

The best credit card for travel will depend on which features are most important to you. Take time to compare the best travel credit cards on the market.

Ideally, search for a travel credit card that doesn’t charge an annual fee or foreign transaction fees.

Using your standard UK credit card when you’re abroad can become expensive. You will often pay around 3% on cash withdrawals and for each transaction in a foreign country.

What to consider when comparing travel credit cards:

It’s important to know how to compare travel cards on your own, so you can choose the best travel credit card for you.

Here are a few things to consider when comparing travel credit cards:

  • Foreign transaction fees: The biggest difference with travel credit cards is that they don’t charge a foreign transaction fee. If you’re looking for a card for overseas travel, confirm that it definitely doesn’t charge this fee.
  • Annual fees: While some cards do charge an annual fee, there are plenty of travel cards available that do not. All else the same, it’s better to avoid an annual fee, but be sure to consider all aspects of a card, as sometimes it comes with a deal that makes the fee worth it.
  • Rewards, cashback and other perks: Once you’ve (ideally) found a card that has no foreign transaction fees, charges no annual fee and has a reasonable APR, then you can narrow down your choices further by opting for a card that provides rewards on your spend, discounts on your travel or that offers an introductory 0% interest period.
  • Required credit rating: If you have a high credit score, you should be able to qualify for most or all of our top picks. But if you’re still establishing your credit or rebuilding your credit, there are a few cards on our list that don’t charge foreign transaction fees and accept applicants with lower credit scores.

Should I get a travel credit card?

A credit card for travel can be a good option for spending abroad, but is not for everyone. Here are three things you should ask yourself to determine if a travel card is the best card for you:

  • Do you travel abroad at least once a year? If you travel abroad at least once per year, you’ll get the most use out of a travel card. If you don’t travel abroad very often, you won’t benefit from features such as no foreign transaction fees.
  • Is your credit score good or excellent?  Most travel cards require applicants to have a ‘good/excellent’ credit score. All our reviews have guidance on what level of credit score is required for each card. If you don’t know your credit score, you can find it out using free services such as Noddle or Experian.
  • Do you pay your credit card bill in full? Something to bear in mind with travel cards is that they typically don’t offer any introductory 0% interest period on purchases. Therefore, any purchases you make will be subject to interest charges if you don’t pay off your bill in full. Similarly, any cash withdrawals made abroad will be subject to interest charges, so make sure that you can pay off whatever you put onto your card.

If a travel credit card doesn’t seem the right fit for you, then consider the other options available. For example, prepaid travel cards are great if you prefer to set aside a spending budget before you go away – you can load the card with this before you travel.

Alternatives to a travel credit card

If you’d rather not apply for a travel credit card, consider instead using one or more of the options below:

  • Prepaid cards: Prepaid travel cards are a great alternative as you can pre-load them with money before you travel, and then spend abroad without the risk of getting into debt. Be aware that some prepaid cards charge an application fee and sometimes charge for withdrawing cash.
  • Cash: Cash is an easy option with no chance of technical difficulties or overspending. However, try to avoid carrying large amounts of cash, in case you lose it or it’s stolen.
  • Debit cards: You can use most debit cards in many countries around the world. However, there are usually fees for using your debit card in a foreign country, and you may be charged fees for withdrawing cash, and foreign currency fees on all transactions.

How to pick the best travel credit card

The main feature to look for in a travel credit card picks is the absence of foreign transaction fees.

Here’s a look at some of the specific elements to consider:

  • Overseas usage fees – As mentioned, this is key for a travel credit card. If a credit card has a foreign transaction fee, it shouldn’t appear on your list of the top travel cards.
  • Reward offers – Whether it’s rewards points or cashback, getting rewarded for spending at home and abroad is a nice plus in any credit card.
  • Travel discounts – Some travel cards offer discounts for travel-related spend, while a few offer deals when purchasing foreign currency.
  • Introductory 0% offers – These cards may not be focused on balance transfers or 0% purchases periods, but it doesn’t hurt to have that thrown in, right?
  • Standard APR – If you end up having to pay interest on a balance, a lower APR is naturally better.

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