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 a statement chock full of extra fees and charges. Here is a list of facts to check and calls to make before you set off on holiday to learn how your card will work and how much it will cost to use abroad. With that information, you can decide which card in your wallet will be cheapest to use when travelling. Keep in mind one card may be best for cash withdrawals and another cheapest 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. Why? If you elect to pay in pounds when you're overseas, then you're letting the retailer determine the exchange rate you're paying—this is bound to be worse than the exchange rate set by VISA, MasterCard or Amex.
There are three ways to determine the foreign transaction fee on your credit card:
- Call your credit card's customer service line to ask
- Check your paperwork for the terms and conditions
- 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. Alternatively, Google the name of your card and "summary box" or "terms and conditions" to find it—for instance, "Halifax Clarity terms and conditions". There you'll be able to 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 charge an FX fee, despite the fact they are "travel" 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
Most credit cards charge for cash withdrawals, usually at a rate of 3%, with a minimum £3 charge per transaction. This cash withdrawal fee is charged in addition to the foreign transaction fee if you take out cash in the local currency from an ATM while abroad. That means cash withdrawals can be subject to double fees (and they're typically charged at higher interest rates that start racking up immediately, with no grace period).
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—that is, there is no grace period on interest for getting cash from an ATM. And oftentimes the cash interest rate is significantly higher than your purchase interest rate.
In that case, even if you pay back the full balance on time by the next due date, you'll still pay interest on any cash withdrawals you made during the statement period. A few travel-specific cards offer a grace period on cash withdrawals, but you'll only get the grace period 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. Before you leave home, read up on both the foreign exchange fees and cash withdrawal fees for using your debit card abroad, 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 money in your account to fund the withdrawal.
5. Let your Bank Know You'll be Abroad
In the interest of fraud prevention, your credit card company may freeze your account when they notice it is being used overseas. To help avoid this potentially disastrous situation, alert your credit card provider to your travel plans before you leave home. We should point out that this doesn't always work—we've read many customer reviews in which consumers complain that their credit card was frozen while they were abroad—despite notifying their company ahead of time.
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|