If you’re heading away, besides having your flights, accommodation and insurance in order, it’s important you take the right plastic with you. So what is a travel credit card? And what are the benefits of using one? Here’s the lowdown.
What is a travel credit card?
A travel credit card offers good exchange rates when you use it overseas.
It makes really good sense to have one, especially if you travel abroad a lot. That’s because if you rely on a ‘standard’ credit card abroad, you could be hit with a variety of fees and charges, such as:
- Non-sterling transaction fees. These fees are typically around 3%.
- Cash withdrawal fees. This is the cost of withdrawing from an ATM. Fees are typically 3%.
- Spending charges. These are fees you’ll pay every time you spend on the card. Charges can range from £1 to £2.
- General interest charges. While you typically aren’t charged interest on spending if you clear your card by the end of the month, some cards will charge interest from the moment you make an overseas withdrawal.
While not all standard cards apply all of the charges and fees listed above, if you don’t have a specialist travel credit card, you could be adding a significant amount to the cost of your trip.
What do travel credit cards offer?
A good travel credit card will offer 0% interest on all overseas spending. That means that you won’t be charged any non-sterling transaction fees when you spend overseas, as long as you clear the card in full by the end of the month.
It also won’t hit you with a fixed ‘spending charge’ every time you use your card for overseas purchases.
However, finding a travel credit card without any fees on overseas cash withdrawals can be trickier. That’s because it can be costly for the credit card provider to offer fee-free withdrawals. The reason is that they have to pay the owner of the foreign ATMs a fee every time you use them.
That said, some travel credit cards, still won’t charge you a fee for making overseas cash withdrawals. Instead, they may cap the amount of overseas fee-free withdrawals you can make.
Other providers may charge interest on cash withdrawals from the moment you take cash out of an ATM, even if you pay off your balance in full by the end of the month. To minimise this cost, you can pay off your balance early by logging into your credit card account while overseas.
What exchange rate will I get?
While a travel credit card may offer 0% interest on overseas spending, and even withdrawals, your exchange rate will often depend on the payment network that issues your card.
The three major payment networks are Mastercard, Visa, and American Express, and all have their own exchange rates. This means that the logo on your card will determine the exchange rate that applies to you.
Yet this isn’t something to be overly concerned about. To calculate exchange rates, these networks use a range of sources including wholesale currency markets, so they are very similar. As a result, it’s probably not worth picking a card based solely on the payment provider’s exchange rate.
Travel credit cards: What else do I need to know?
Before deciding on a travel credit card, it’s worth bearing in mind the following:
1. Debit cards can be good overseas too.
Some debit cards, and even prepaid cards, may also offer fee-free overseas usage. Most don’t, however, so always take the time to check overseas fees.
2. If given the choice, pay in the local currency.
While abroad, you may be given the choice of paying in pounds. Doing so will likely be far more expensive as you’ll be paying the retailer’s exchange rate.
3. Travel credit cards carry section 75 protection.
Any purchases over £100 that you make on your travel credit card will carry Section 75 protection, just like at home.
4. You can use travel credit cards on overseas websites.
If using an overseas website, a travel credit card can help you avoid fees.
5. Applying for a Travel credit card will require a credit check.
To see which travel credit cards you will most likely be accepted for before applying, you can use our credit card eligibility checker.
And if you’re ready to get an overseas card, check out our top-rated travel credit cards in the UK to find the right one for you.
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