Using Your Credit Card Overseas - What You Need to Know

Credit cards have been adopted by many as the preferred method of payment whilst overseas, offering a safe and convenient alternative to large wads of cash or cumbersome traveller's cheques. But convenience comes at a cost.

Here are our top-tips for using your credit card abroad to help you avoid arriving home to a nasty surprise in your letterbox.

Be aware of loading fees

A loading fee is a charge applied by your credit card provider to every transaction made whilst abroad. This is typically around 2.75% so if you make spend £100 you will be charged £2.75. It's not hard to see how over the course of a two-week holiday the amount you spend can spiral. Loading fees often wont show on your monthly statement so check your card's terms and conditions.

Avoid making cash withdrawals

This rule holds whether at home or abroad. Withdrawing cash on a credit card typically incurs a fee of around 2.5%. In addition, your provider is likely to start charging interest on the amount withdrawn immediately rather than allow an interest free period. And to drive the nail firmly into the coffin, this interest rate is likely to be much higher than your card's standard APR, in some cases as high as 27.9%!

If the above hasn't put you off its time to make yourself familiar with the concept of a hierarchy of payments. Many credit card providers will leave payment of cash withdrawals until last meaning that you pay the inflated interest rate for the duration of your card's balance.

Always pay in the local currency.

Some overseas retailers will use a Dynamic Conversion Rate when presented with payment by credit card. This converts the price of the purchase into Sterling allowing you to see how much you are spending rather than relying on rough mental conversions.

This can look initially like a kind favour but the downside is the higher exchange rate used in the conversion, typically in the region of 3%, meaning you pay more. Some retailers automatically apply the conversion rate so always check which currency you are paying in and if necessary ask to pay in the local currency.