What are travel credit cards?
When you make a purchase or take out cash in another currency on a debit or credit card your bank will charge you to convert what you spend into pounds sterling.
Two factors will determine what this costs you: your card’s payment network exchange rate set by Mastercard, Visa or American Express and the fees your provider slaps on top.
Specialist travel credit cards don’t come with these fees, making it much cheaper to spend abroad or on foreign websites in another currency.
How much does it cost to use my credit card abroad?
You could face a range of charges for using your regular plastic overseas.
Typically your card will either exchange at the Mastercard, Visa or American Express wholesale rate, which are near perfect.
However, providers then apply a variety of fees to make the exchange depending on the type of transaction – which is where costs can really start racking up.
There are three different types of charges that can be layered on when using a credit card:
- Non-sterling transaction fee – This is a percentage of the value of each transaction. You’ll typically pay up to 2.99% each time you use a credit card.
- Non-sterling cash fee - You can also expect to pay a fee of around 3% (minimum £3) when you take money out of an ATM with a credit card.
- Interest on cash withdrawals – When using a credit card you’ll be charged interest on cash withdrawals straight away, until the date you pay off your balance.
So it’s important to choose carefully, as some cards could prove a costly travel companion. Use the wrong card and you could be hit with all three of these charges.
Specialist travel credit cards will normally waive the non-sterling transaction fee and in some cases the cash fee too, making it much cheaper to spend on foreign transactions.
How much does your card charge?
Now that you know what to look for, check what your credit card provider charges on foreign transactions to see if you might be better off with a specialist travel credit card.
Most credit card providers charge a non-sterling transaction fee of 2.99% and a non-sterling cash fee of 3% (minimum £3) plus cash advance interest which can be as high as 29.9%.
So a card spend of £10 can cost you £2.99 but a £10 cash withdrawal could cost you £5.99 at the time plus £1.79 interest if you don't pay it off within 12 months.
What are the best credit cards to use abroad?
Here are the best credit cards to use for overseas spending or shopping in a foreign currency.
Who are the best travel credit card providers?
It can be difficult to know which provider to pick and when you become a customer it can be too late to change your mind.
Which? has reviewed how 29 credit card providers have performed based on customer service, ability to manage and keeping you in the loop with new deals.
You can find out more about the biggest names in the travel credit card market with the Halifax credit card review, Nationwide credit card review, Post Office credit card review and Aqua credit card review in our best and worst credit card providers.
Travel credit cards golden rules to follow
If you are planning to use a travel credit card on your next trip make sure you follow these golden rules.
#1 Don’t withdraw cash
Even with a card that doesn't charge a fee for overseas cash machine withdrawals, you may still want to avoid taking money out.
This is because you'll typically incur interest straight away and sometimes at a higher rate.
If you're organised and pay off your credit card really quickly, you can prevent these charges racking up. But this may be a hassle you'd rather avoid.
There is also a small risk of harming your credit rating if you use your credit card for ATM withdrawals.
#2 Spend in the local currency
If you've got a top overseas card, always choose the local currency, as your card does the exchange at the best rates.
#3 Avoid borrowing if there’s no 0% period
You should aim to pay back what you owe each month to avoid interest racking up, unless you can secure a card with a 0% purchase period.
Travel credit cards FAQ
Confused about travel credit cards? Check if we have the answer to your question below.