Paying by card on holiday? Take the right plastic

A growing number of British holidaymakers are choosing to pay by plastic when they're abroad, according to new research, primarily because it's convenient.


For a start, it avoids having to hunt around for a cash machine – something that almost half (43%) of those surveyed by MasterCard said was a waste of time on holiday which could be better spent relaxing on the beach or exploring new sights.

And security also plays a part, with 41% of people saying they'd prefer not to carry cash with them in case it gets stolen.

But if you are planning to take a credit or debit card with you while you're away, you need to ensure you take the right kind as many cards charge you for spending and withdrawing cash overseas.

These charges include a foreign transaction fee (or loading fee) of around 2.75% to 3% every time you spend on the card. And if you withdraw money from an ATM, you'll also be hit with a cash transaction charge of around 2% or 3% of the amount withdrawn (minimum charge of £2 to £3). Plus, you'll be charged interest from the moment you withdraw your cash.

Fortunately, there are a number of debit and credit cards that allow you to sidestep some, if not all, of these charges. Below, we reveal the best options.

Best debit cards for overseas spending

Norwich and Peterborough Building Society offer two current accounts that won't charge you for spending on your debit card overseas or to make cash withdrawals abroad. These are the Gold Classic current account and the Gold Light current account.

But while this is good news, be aware that you will need to pay at least £500 a month into the Gold Classic account or hold a balance of at least £5,000, otherwise you'll face a £5 monthly fee.
The same fee applies to the Gold Light current account if you don't make at least five transactions a month into the account or have a minimum balance of £5,000.

Another option is Metro Bank which also waives foreign exchange and cash withdrawal fees on its current account debit card, but if you are thinking of applying for the account, bear in mind Metro Bank only has branches in London and south-east England.

Best credit cards for overseas spending

If you'd prefer to spend on a credit card while you're overseas, one option is the Halifax Clarity Credit Card. It waives all foreign loading fees and cash withdrawal fees anywhere in the world, but be aware that if you do withdraw cash, you'll be hit with a representative annual percentage rate (APR) of 12.9% (variable) from the day you withdraw your money.

Capital One’s Aspire World card also has no fees on foreign transactions, making it ideal for spending, but avoid withdrawing cash on the card as you'll pay a fee of 3% of the amount withdrawn (or £3, whichever is greater) and be hit with a representative APR of 19.9% (variable). The card also offers up to 1.25% cashback on transactions made back at home in the UK. You can read more about this card in Mark Hooson's article.

Alternatively, the Post Office Platinum credit card is free to use anywhere abroad and also comes with three months interest-free on purchases which could be handy for holiday spending. But be sure to clear your balance in full before the 0% shelter ends, otherwise you'll pay a representative APR of 16.9%.

Cash withdrawals with the Post Office card will face a fee of 2.5% (or £3, whichever is greater) and you'll be charged a higher representative APR of 26.9%.

For the over 50s, the Saga Platinum credit card also does away with any loading fees and offers nine months of interest-free spending, after which the representative APR jumps to a relatively reasonable 11.9% (variable).

However, if you’re looking to withdraw cash on the card whilst abroad you will be charged the greater of £2 or 2% of the amount withdrawn. But the good news is that you won’t incur any interest on withdrawals should you pay back in full by the end of the month.

Finally, exclusive to Nationwide current account holders is the Nationwide Select Credit card. This card allows you to spend overseas fee-free, while also offering 0% on purchases for 12 months. After that, you'll be hit with a representative APR of 12.9%. Again, it's best to avoid cash withdrawals with this card as you'll face a fee of 2.5% (or £3) and a representative APR of 27.9% (variable). It's also worth noting that when you use the card in the UK, you'll earn 0.5% cashback on purchases.

Consider a prepaid card

An alternative to debit and credit cards is a prepaid card. Although they allow you to spend and withdraw cash as usual, the main difference is that you'll need to load them up with cash in advance and you can only spend that amount. Several prepaid cards are designed for using overseas and allow you to pre-load them with foreign currency, some of which charge no fees.

For instance, the My Travel Cash euro or dollar currency cards come with no ATM fees or transaction fees when they are used abroad. However, be aware if you don't use your card for 12 months, you'll be hit with an inactivity fee of around £2.

The ICE Travellers Cashcard euro and dollar cards also offer fee-free ATM withdrawals and purchases abroad.

If you’re travelling to a country which doesn't have euros or dollars as its main currency, you will need to take out a sterling currency card, such as the FairFX Anywhere Card. However, there is a 1.4% charge for foreign transactions and a £1 fee for ATM withdrawals. 

The AA Worldwide (Sterling) Travel Currency Mastercard Prepaid Card also offers a good option for countries that operate outside of the US dollar and euro currency zones as it offers fee-free point-of-sale purchases anywhere in the world (except those that the foreign office deems unsafe for UK travellers).

This card also comes with a flat, cash withdrawal fee of £1.50. 

For more on the pros and cons of using prepaid cards when travelling, read this article, and you may also want to read 5 reasons a prepaid card could suit you.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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