Guide to Travel Money and Foreign Exchange – 4/6

Guide to Travel Money and Foreign Exchange Credit cards often carry concerns as the wrong card (or even the right card in the wrong hands) can cause more problems than it solves. Nevertheless, if you find the right credit card, this can be the best way to carry your cash overseas.

Using a credit card abroad

A lot of providers will have special travel credit cards purposefully targeting the frequent flyer with air-mile points and other loyalty rewards. Of course these bonuses are great but the rate should always be your first consideration. With that in mind it’s often a good idea to have a credit card just for using when overseas – and that can be paid off in full each month.

The best form of credit card to take abroad is one that offers 0% on purchases. This means that you will not pay any interest on anything you buy making credit cards one of the most convenient and cost-effective ways of paying abroad.

Still, there are fees to be wary of:

  • Cash withdrawal fees - As with debit cards, be wary that taking money out will cost you often in the region of 2% and regularly a lot more with credit cards.
  • Loading charges - Again, much like debit cards, this can be as high as 2.75% and won't show up on a statement as a 'mark-up'.
  • Interest charges - If using a credit card be aware of immediate interest charges, particularly for cash withdrawals, which incur fees when you don't repay your balance in full.

Again the aim with a credit card should be to get a good rate and the lowest fees - and there are some providers who won't charge loading fees if you shop around. If possible avoid making cash withdrawals at all on your credit card, as you would at home, and retain it for purchases - a mixture of both cash and credit cards can offer the best money saving solution when travelling abroad.

Beware! Dynamic currency conversion

If you're using a credit or debit card abroad, some merchants will now offer to convert your bill into your home currency in a process known as 'dynamic currency conversion'.

This carries the supposed advantage of allowing you to see the exact price in your home currency. However, you will be charged a higher exchange rate for this service - the merchant benefits with foreign exchange commissions. So think twice before you go for this option and bear in mind that you might not always be asked! Check your bill before signing anything or entering your PIN - if you are being charged in Sterling, ask to be billed in the local currency.

In part six we'll take a look at the alternative to credit and debit cards.