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What is a travel credit card?

A travel credit card works just like a standard credit card in the UK - but unlike most standard credit cards and debit cards, you won’t be charged a fee to use your travel credit card abroad.

How does a travel credit card work?

A travel credit card works like a standard credit card – you pay for purchases on the card and pay back the balance.

You can use your card for purchases in the UK or abroad, but if you decide to use your card abroad, you won’t have to pay a fee to your card provider to convert the payment from a foreign currency into sterling – this is called a foreign transaction fee.

Many standard credit card providers will charge this fee when you pay for something using your card abroad. This fee is made up of the payment network’s (Visa or MasterCard) fee and your bank’s fee and can be around 1% to 3% of the payment cost. A travel credit card will help you to avoid this.

If you use a travel card, you also won’t have to pay an extra fee for any online purchases you make in a foreign currency.

What’s more, travel credit cards often won’t charge you a fee for withdrawing cash overseas (on standard cards this is typically around 3%), but be aware you will still be charged interest and you’ll be charged from the moment you receive your cash – even if you pay off your balance in full each month.

Bear in mind travel credit cards don’t generally come with interest-free offers on purchases, so it’s best to pay off your balance in full each month to avoid paying interest.

What are the advantages of an overseas spending card?

Some advantages of overseas spending cards include:

  • No foreign transaction fees: travel credit cards are designed to be used abroad, which means you won’t have to pay foreign transaction fees.
  • Good exchange rates: travel credit card exchange rates are generally pretty competitive.
  • Rewards when you spend: some travel credit cards will offer rewards like cashback, travel rewards and vouchers when you spend worldwide.
  • Cash withdrawals: some travel credit cards might let you withdraw cash from a cash machine abroad without charging you a fee. However, the ATM you use may still charge fees and more importantly, you’ll still be charged interest on cash withdrawals even if you clear your balance each month. It’s therefore best to avoid cash withdrawals on your credit card.

What are the disadvantages of an overseas spending card?

Some disadvantages of overseas spending cards include:

  • High interest rates: travel credit cards will often come with high interest rates - which means if you don’t pay the balance off in full each month, you might end up cancelling out the exchange rate benefits you get with the interest you have to pay.
  • Not everyone is guaranteed to be accepted: you might need to earn a certain amount of money or have a good credit score to be accepted for a travel credit card.
  • Monthly or annual fee: because some overseas spending cards come with rewards and benefits, you might have to pay a monthly or annual fee to use the card.
  • Check your credit card payment network will be accepted: some countries you’re planning on travelling to might not accept payments with a Visa or MasterCard. It’s always a good idea to check that your travel card payment network will be accepted in the country you’re going to before you leave.

It’s important to remember that the benefits and terms and conditions offered by overseas spending cards can be different, so you should always read the product details fully before applying.

The average annual income of applicants for different types of credit cards

The average annual income of consumers looking to take out an overseas credit card is £82,040, according to MoneySuperMarket data from August 2016 – August 2018.

Is it better to pay in the local currency?

It’s a good idea to pay in the local currency when using your travel credit card abroad because you’ll get your payment network’s daily exchange rate rather than the retailer’s – which, most of the time, isn’t that competitive.

Who is a travel credit card for?

A travel credit card can be a good option if you go on holiday a few times a year, or if you regularly buy goods or services from international websites.

But if you’re only planning on going abroad once or twice a year and you’d prefer to set aside a spending budget ahead of time, you might prefer a prepaid travel card (which you load up with cash before you go) or simply take travel money.

A graph showing the time of year people tend to apply for travel credit cards

The summer months are more popular for consumers looking to apply for a travel credit card, according to MoneySuperMarket data from August 2016 – August 2018.

Compare travel credit cards to find the best one for you

Comparing travel credit cards can help you find the best card for spending abroad. MoneySuperMarket’s Eligibility Checker tool asks you a few questions about your financial and living situations to help you find overseas spending cards you’re most likely to be accepted for. Select ‘Spending abroad’ when the checker asks you what you will use your new card for to compare credit cards that are designed to be used abroad.

You can sort the results by ‘Highest approval likelihood’ to see if each card result charges a ‘Foreign Purchase Fee’, if the card provider offers any rewards and the annual percentage rate - APR - charged. By clicking ‘Full product details’ in the card result you’ll also be able to look at the cash advance handling fees to see if the provider charges you to withdraw cash abroad, plus any other fees or terms and conditions you’ll need to meet to be approved.

It’s important to remember that the eligibility checker tool will only show you credit cards you’re likely to be approved for based on the questions you’ve answered. If you then decide to apply for a travel credit card, the card provider will look at your credit report to decide whether they’ll lend to you, and what credit limit and interest rate they will offer.

 

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