As a nation, overseas card fees are costing us £122million a year, according to Santander. But there are a number of cards that don’t levy charges for use overseas.
The latest to be launched is the Halifax Clarity card. We take a look at how it stacks up for spending on both here in the UK and abroad…
What’s the deal?
The Halifax Clarity card has a typical annual percentage rate (APR) of 12.9%. This applies to purchases, balance transfers and cash withdrawals, which is quite unusual – most credit cards levy a higher interest rate on cash withdrawals, and many also charge more on balance transfers than they do on purchases.
The rate of 12.9% is highly competitive as the average APR for purchases is around 18%.
There are no usage fees, which means you won’t be charged for making a balance transfer, using your card abroad or withdrawing cash from an ATM.
If you have a Halifax Reward or Ultimate Reward current account, you’ll earn £5 each month you spend more than £300 on your card. Add that to the £5 monthly reward you receive on your current account, that means you could net £120 a year.
And if you apply for a Reward account through moneysupermarket.com you’ll also receive £50 cashback, upping the total to £170 - you need to hurry though to take advantage of this exclusive current account offer as it ends on 29 July.
One of the golden rules with credit cards is not to use them for cash withdrawals. The main reasons for this are that you’re usually charged a withdrawal fee and a high rate of interest.
However, even though the Clarity card charges the same rate of interest regardless of how you use it and doesn’t levy a withdrawal fee, it is still more expensive to use for cash withdrawals than it is for purchases.
The reason for this is that you start accruing interest from the day a cash withdrawal is made, so even if you pay your credit card bill off in full each month, you can’t avoid interest. (If you only use the card for spending on, you won’t be charged interest assuming you pay the balance off every month).
The APR of 12.9% is a ‘typical’ rate, meaning it only has to be offered to 66% of successful applicants. You could therefore be offered a higher rate of either 17.9% or 21.9%. The rate you are offered will depend on your credit rating.
The minimum monthly repayment is 1% of the outstanding balance or £5, whichever is greater. However, while this may sound an attractive feature, you should try and pay more than the minimum each month. Otherwise it could literally take years to clear your balance.
For example, if you spent £1,000 on the card and only made the minimum monthly repayment, it would take you 16 years and 10 months to pay off the debt. However, if you paid off £50 a month, you’d pay your balance off in two years and one month.
It’s refreshing to see a relatively simple and straightforward credit card launched. All too often, credit cards are riddled with complicated terms and conditions so that, while they can be a great deal if used in the right way, you can easily get caught out and find your fantastic credit card ends up costing you more than you were expecting.
Certainly, if you holiday abroad once or twice a year, the Clarity card is a good one to have in your purse or wallet.
Other cards that don’t charge overseas’ loading fees include the Santander Zero Card, the Post Office Credit Card and Nationwide Gold Card. However, all three charge higher rates of interest than Halifax and the rate varies depending on how you use the card. Also, the Nationwide card is only free if you use it in Europe – you’ll be charged a loading fee of 1% elsewhere in the world.
That said, if you want to spread the cost of this summer’s holiday spending, Nationwide and Post Office both have a three month 0% period on purchases, so in the short term, they’re better value than the Clarity card.
However, if the reason you are looking for a credit card because you want to make a balance transfer or an expensive purchase you can’t afford to pay for in one go, there are better alternatives. The leading balance transfer cards offer interest-free periods of more than 12 months, while the best purchase cards have 0% offers which last for 12 months.
You must pay something off your credit card every month and it’s always worth paying as much as you can afford. If you only make the minimum monthly payment it could take years to clear the balance and cost you hundreds, if not thousands, of pounds in interest.