In a recent moneysupermarket.com poll, 20% of people said free overseas’ usage was the most important factor when looking for a new credit card. But with so many cards charging up foreign usage fees of up to 3% when you use them for spending abroad, plus further fees for cash withdrawals, finding the right plastic to take with you can be difficult.
Here, we give a rundown of the best credit and pre-paid cards for all your summer holiday spending….
Best credit cards for use abroad
The Halifax Clarity card is the winner when it comes to low overseas charges, as it has no foreign exchange fees wherever you use it. There is also no fee for cash withdrawals. However, you will be charged interest on the amount you take out even if you repay your balance in full.
The good news is that the rate for cash withdrawals is much lower than most cards at an annual percentage rate (APR) of 12.9% representative APR (variable). That means if, for example, you withdrew £200 in cash, you’d be charged around £2 a month in interest.
The Santander Zero card similarly has no foreign usage fees anywhere in the world, but you will only be able to apply for it online if you are an existing Santander customer. Otherwise you will have to apply in one of Santander’s branches.
Again you have to pay interest on any withdrawals, even if you repay in full, although there are no additional cash withdrawal fees on top of this. Cash withdrawals are charged interest at a high 27.9% representative APR (variable), so you should stick to using this card for purchases - these are charged interest at a representative APR of 18.9% (variable).
Another option worth considering for your holiday spending is the Nationwide Credit Card. Whenever you spend with the card in the UK, you earn a certain amount of fee-free spending abroad. You earn this fee-free overseas allowance at a ratio of five to one, meaning if you spend £2,500 in the UK, you can spend £500 abroad without paying commission or overseas usage fees. However, even if you don’t use the card that much in the UK, it still has one of the lowest commission charges at 2%.
The card offers 0% for six months on new purchases and after that has a representative APR of 15.9% (variable). To help people build up their allowance, until 31 July 2011 all purchases abroad will be commission-free and purchases in any currency will go towards your commission-free allowance.
The card does, however, have a cash withdrawal fee of 2.5% of the amount withdrawn, with a minimum charge of £3. You are also charged 27.9% APR on cash withdrawals even if you repay your balance in full.
If you are aged 50 or over, you may want to consider the Saga Platinum card. This card has no foreign exchange loading fees, although it does charge a minimum fee of £2 or 2% of the amount taken out for cash withdrawals.
You don’t pay any interest on cash withdrawals provided you repay your balance in full. If you aren’t able to do this, cash withdrawals are charged at 19.6% APR and the card has a representative APR of just 11.9% variable on purchases.
Another card which is worth a look is the Post Office credit card. This card also has no foreign exchange loading fees anywhere in the world, but there is a minimum £3 charge, or 2.5% of the amount taken out, every time you withdraw cash from an ATM.
You will also be charged 24.1% APR on cash withdrawals even if you repay your balance in full, so you should try and use this card for purchases only if possible. Interest on purchases is charged at a representative APR of 16.9% variable.
Best for withdrawals
Most credit cards designed for overseas using may come with no ATM fees, but you will still be charged interest from the day you make the withdrawal. The exception is the Sainsbury's Gold Card which offers an interest free period on cash withdrawals, as long as you pay off the transaction in full at the end of the month.
The card also doesn’t impose any foreign exchange fees, and also doesn’t have any cash withdrawal charges. It also comes with worldwide family travel insurance, but the drawback is that there is a £5 monthly fee. The travel insurance covers up to six children and two adults under the age of 65, and it includes 17 days of winter sports cover a year.
If you aren’t able to clear your balance immediately, the card has a representative APR of 20.1% variable on spending and charges 24.9% APR for cash withdrawals.
If you don’t want to take out a credit card, a pre-paid card is well worth considering, as many of these have no charges for use abroad both on purchases and ATM use. They are free to take out and have no running costs. Unlike cash, should your card be stolen the funds will be protected, and they can be topped up easily online or over the telephone.
The market leading pre-paid cards for use abroad are from FairFX and Caxton FX. The FairFX card charges €1.50 or $2 for ATM use but has a favourable exchange rate while the CaxtonFX card has no charges.
If you are using a pre-paid card, you can hold money on these cards for two years, so if you have any money left over at the end of your holiday you can keep it for use on future trips.
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