Are you playing your cards right abroad?

Traditionalists may have lamented the loss of another major high street brand this week, but travellers should have no such regrets about the rebranding of Abbey credit cards.

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Spanish bank Santander, which currently has three British brands – Abbey, Alliance & Leicester and Bradford & Bingley – accelerated its rebranding by scrapping the Abbey name on new credit cards and bringing them under the Santander umbrella instead.

As part of the re-launch, it also announced that its cardholders will be able to use their credit cards abroad for the rest of this month and the whole of July without any charge. Normally, overseas usage on a Santander card, with the exception of the Zero Card, incurs a 2.95% surcharge.

A good deal with a catch

The temptation for travellers looking to spend on their plastic this summer is to focus on the Santander range thanks to this offer. The Santander credit card is particularly enticing for those with existing debts as it offers 0% for 15 months on balance transfers, with a 3% balance transfer fee and an ongoing, typical APR of 15.9%.

However, the card only offers 0% for three months on purchases, meaning that any spending at home or abroad will start to accrue interest from the end of the third month. Balances built up in the first three months will also attract interest from this point, as payments made to the card company will be used to pay off any balance transferred first. This is known as negative payment hierarchy in which cardholders effectively pay back the cheapest debt first while building up interest elsewhere.

What else to watch out for

If you do not bank with Santander and are planning to use your credit card abroad this summer, then be aware that overseas card usage often comes with a host of charges. Fees to watch out for include:

  • Foreign loading fees: The Visa/Mastercard wholesale rate is one of the best exchange rates around. However, on top of the exchange rate most card providers charge loading fees – the average is 2.81%. This means that £1,000 worth of spending overseas will cost you £28.10 in charges.

 

  • Cash withdrawal charges: You should always try to avoid using a credit card for withdrawing money at home or abroad. If you use your card to withdraw cash then – even if it’s repaid in full at the end of the month – you will be charged as much as 23.9%. However, the fees imposed are even more extortionate if you do this overseas. Using a cash machine in another country will typically cost you 2.5% of the amount withdrawn and you may also be hit with an additional charge from the overseas bank

Fortunately, however, you do not have to incur any of these charges if you shop around for the right card to use on your travels.

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The best cards for travellers

One of the best options for holidaymakers is the Santander Zero Card (formerly the Abbey Zero Card). It has no foreign exchange loading fee anywhere in the world meaning you always benefit from the best exchange rate, and there is no cash withdrawal fee either. However, if you plan to use the card for withdrawals bear in mind that there is still a cash withdrawal interest rate of 27.9% - even if you pay off your balance in full.

Another alternative is the Post Office Credit Card. Though it doesn’t offer fee free withdrawals like Santander – it charges a 2.5% fee – there are no foreign exchange loading fees anywhere in the world.

Nationwide offers a third choice with its Gold Card, which charges no loading fees in Europe. However, bear in mind that it charges 0.84% elsewhere in the world and that this will rise to 1% in July. It also carries a 2.5% withdrawal fee.

Customers who bank with Nationwide may therefore be better off using the FlexAccount Visa Debit Card, which has no loading fee within Europe and also offers fee and interest-free cash withdrawals. However, those travelling further afield should note that, outside Europe, it too carries a 0.84% loading fee that is set to increase to 1% in July.

The over-50s have one other option in the form of the Saga Platinum Card, which has no loading fees in Europe, but does charge 1% elsewhere. It has a cash withdrawal fee of 2%, but on the plus side if you do pay off your balance in full at the end of the month, there is no interest to pay on the withdrawal.

What if you don’t qualify for a leading credit card?

If you don’t qualify for one of the leading overseas usage credit cards, then consider a prepaid card as an alternative.

FairFX’s Euro Currency Card and Dollar Currency Card are two of the cheapest prepaid cards on the market. They have no spending or foreign loading fees, with cash withdrawals coming in at €1.50/$2. Alternatively, there is the Caxton Euro Card and the Caxton Dollar Card, which also have no spending or foreign loading fees and charge €2/$3 per withdrawal.

You can find out more about how prepaid cards work in our video ‘Travel money options’.

And for more help saving money while overseas, check out our article ‘Ten tips to get the best deal on holiday money’.

Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing. Products underlined can be applied for directly.

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