Credit cards are so easy to use abroad, we often forget that doing so may result in fees - until we get home from holiday and see the latest bill, that is. Here is a list of facts to check and calls to make before you set off, so you can be fully aware of potential charges and decide which card in your wallet will be cheapest. Keep in mind one card may be best for cash withdrawals and another best for purchases.
1. Check for Foreign Non-Sterling Transaction Fees
Most credit cards charge a 3% fee per foreign currency transaction (minimum £3 each time you use the card). Despite this fee, it is almost always preferable to pay in the local currency and let your credit card issuer manage the currency exchange, rather than pay in pounds (letting the retailer determine the exchange rate).
To determine the foreign transaction fee on your credit card, you can call, check your paperwork for the terms and conditions or, for a quick and quite reliable check, find the Summary Box for your credit card online. The Summary Box should be a visible link on the credit card's web page. (Google the name of your card, for instance "Halifax Clarity," to find the card's web page.) Towards the bottom of the Summary Box, you should find the foreign transaction fees.
If you have multiple cards in your wallet, check the foreign transaction fees on them all - you may be surprised by which one charges the lowest fee. For instance, most airline or hotel co-branded cards do charge an FX fee, despite the fact they are travel-rewards cards. There are a number of credit cards in the market that do not charge any FX fees, which you can read about in our article on Credit Cards with No Foreign Transaction Fees.
2. Check for Cash Withdrawal Fees
The cards in your wallet likely charge for cash withdrawals, too - usually 3%, minimum £3. This fee will be due in addition to the foreign transaction fee if you take out cash in the local currency from an ATM while abroad. (You won't be charged a cash withdrawal fee for using your credit card to pay for a purchase or service at a retailer.)
You can also find the cash withdrawal fee in the Summary Box for your card online.
3. Find out if Cash Withdrawals have a Grace Period
Be aware that in addition to a cash withdrawal fee, in most cases a cash withdrawal will start accruing interest from the day you use the ATM - there is no grace period. And sometimes at a higher interest rate. This means that even if you pay back the full balance on time by the next due date, you'll still have an interest charge on any cash withdrawals you made during the statement period. A few cards offer a grace period on cash withdrawals - if you pay the full balance by the next due date. Again, you can find more information in our article on No Foreign Transaction Fees Credit Cards.
Again, you can find any grace period information in the Summary Box on your credit card's web page.
4. Check Foreign Usage Fees and Cash Withdrawal Fees on your Debit Card
It's important to know the FX facts on your debit card, too. Learn about any foreign exchange fees or cash withdrawal fees for overseas use, then decide on the cheapest card in your wallet - it may be your debit card or one of your credit cards.
Since debit cards withdraw directly from your current account, you won't incur interest charges on cash from an ATM, regardless of currency - so long as you have sufficient balances.
5. Let your Bank Know You'll be Abroad
In the interest of fraud prevention, the bank may freeze your account when they notice it is being used abroad. To help avoid this holiday-crushing situation, alert the bank to your travel plans ahead of time. (Note, this doesn't always work.)
Summary of 5 Money-Saving Credit Card Tips
|Before You Travel|
|1. Check Foreign Non-Sterling Transaction Fees||Applies to both purchases and ATM cash withdrawals|
|2. Check for Cash Withdrawal Fees||Applies to ATM cash withdrawals|
|3. Do Cash Withdrawals have a Grace Period?||Applies to ATM cash withdrawals|
|4. Check Foreign Usage Fees and Cash Withdrawal Fees on your Debit Card, too||Applies to both purchases and ATM cash withdrawals|
|5. Let your Bank Know You'll be Abroad|