Why you should compare travel credit cards

If you want to find the cheapest travel credit card to use on holiday this year, it is important to compare as many as possible to find the best one.
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A travel credit card can save you a lot of money if you plan to spend on plastic abroad. It can also be beneficial if you need a low cost backup in case you spend all your travel money on holiday.

Unlike standard credit cards, travel credit cards don't charge fees for using your credit card abroad. Often these are known as foreign transaction fees and they can add up to a fair sum.

How do travel credit cards work?

Travel credit cards enable you to avoid paying expensive foreign transaction fees when you spend on your card overseas. Standard credit cards typically charge around 2.99% on each foreign transaction which means on a £100 spend, you’ll pay an extra £2.99.

In addition, if you use a standard credit card to make a cash withdrawal from an ATM, you’ll be charged a cash withdrawal fee of around 2.99% on top of the foreign transaction fee. So if you withdrew £100, you’d be charged £2.99 for the cash withdrawal and another £2.99 for the foreign transaction fee - totalling £5.98.

In comparison the best travel credit cards won’t charge a foreign transaction fee or a cash withdrawal fee, potentially saving you a decent sum of money. 

Should you withdraw cash from a travel credit card?

Although some travel credit cards won’t charge you a fee for withdrawing cash from an ATM, the vast majority will charge you interest on your withdrawal. This interest is charged from the moment you get your cash and applies even if you pay off your balance in full that month. 

What’s more, interest rates on cash advances are generally much higher than those on standard credit card purchases. As a result, cash withdrawals are generally best avoided and should only be used in an emergency. 

That said, provided you’re paying it off at the end of the month, it might be cheaper to take out money on the travel credit card and pay interest than pay your bank account’s foreign transaction fees - so it’s worth checking to see what your bank charges for this before you head overseas. 

You can find out more about the best way to spend abroad here

What exchange rate will I get?

Your travel credit card will usually exchange at the Visa, MasterCard or American Express wholesale rate, depending on your card network.

When spending on your card abroad, if you’re asked whether you’d like to pay in the local currency or pounds sterling, always opt for the local currency. If you choose pounds sterling, the exchange is set by the retailer and so  is likely to be worse than that offered by your card provider. 

Do you get Section 75 protection abroad?

Yes, in the same way as if you were using your card in the UK, if you spend between £100 and £30,000 on your credit card in a single purchase abroad, you’ll be protected under Section 75 of the Consumer Credit Act. 

This means if the item you purchased is faulty or the company you bought it from ceases trading, you can get your money back. Find out more here.

What are the alternatives to a travel credit card?

If you don’t want to use a credit card or you’ve left it too late to apply for one, take a look at the alternatives below: 

  • Travel money: You could take enough foreign currency to cover you for your whole trip. To help you take enough, work out how much you want to spend each day and try to stick to this budget.

  • Travel prepaid card: You can add or transfer money onto this type of card, which you can then spend abroad. Some even let you withdraw cash for free abroad too. You can only spend what you top up on the card.

  • Debit card: You could use your debit card to withdraw cash on holiday, or for card transactions. However, you may get charged for both. Check with your bank or building society before you travel to find out how much it could cost you.

You can find and compare travel credit cards here.

Find the best credit card for you, whether you're looking for 0% card for balance transfers or purchases or day to day spending and rewards