Many Britons may be hoping to put the last two years of lockdowns and travel restrictions behind them by heading abroad this summer – even if that means braving airport queues and potential flight cancellations.
However, with the cost of living crisis raging on many may also be looking to cut unnecessary costs where possible.
Finding the cheapest deals for flights and accommodation are the most obvious ways to do just that.
While many are used to doing this, the ‘boring’ parts of trips can often get left behind – such as ensuring you have a credit or debit card that doesn’t charge you through the nose when using it abroad.
Cash splash: It’s likely that travel will be back on the cards for millions this year – and they may have fallen out of the loop on how to spend their holiday cash without penalty
Most debit and credit cards come with a non-sterling transaction fee and cash withdrawal fee for every time you use your card abroad.
This fee includes the currency conversion charge imposed by the card associations such as Visa, Mastercard and Amex and the administration fee imposed by the banks.
The median foreign transaction fee faced by debit card holders is 2.75 per cent according to Fairer Finance, while credit card holders can typically expect a charge of 2.95 per cent.
For example, those with an HSBC debit card can expect to face a 2 per cent fee for withdrawals with a minimum charge of £1.75 and maximum charge of £5 for each transaction. They will also face a 2.75 per cent currency conversion fee on top.
Someone with HSBC’s Rewards Credit Card Mastercard will face a 2.99 per cent transaction fee every time they use their car abroad.
The ATM rule
Just remember when you using your debit card to withdraw cash to complete the transaction ‘without conversion‘ if prompted by the ATM.
Some ATMs will ask you whether you would like to complete the transaction ‘with conversion’ or ‘without conversion’, you should always choose ‘without conversion’.
If you choose ‘with conversion’ or accept the rate proposed by the terminal, the ATM provider can apply their own exchange rate, which is not the interbank rate, and make a profit on your transaction.
As a rule of thumb, you should always opt to be charged in the local currency of the country you’re in! So choose Euros in Europe or US Dollars in the United States.
A typical debit card charges £11.88 when shoppers withdraw £250 in cash abroad, according to analysis by Moneyfacts, while some credit cards can charge £14.95.
Purchases can be costly too, for just a £50 spend a typical debit card can charge £1.38 and a credit card can charge £1.50, according to Moneyfacts.
Withdrawing cash using a credit card should be avoided as it often begin charging you interest at its APR immediately meaning costs can quickly escalate.
However, aside from cash withdrawals, credit cards also have their advantages.
Most notably, they offer greater protection on purchases you make under section 75 of the Consumer Credit Act – even for foreign transactions.
This affords you protection when buying items between £100 and £30,000 and allows shoppers to make a claim against their credit card company to get their money back if a retailer or trader lets them down and refuses to honour the contract.
However, as you’ll likely need to a card that allows you to pay and withdraw freely without the threat of incurring high interest charges, a debit card may be most sensible.
You don’t have to worry about switching or compromising your current bank account. You can just set up a secondary account that you can use when travelling and transfer travel money into it when you go abroad.
With all this in mind, we take a look at some of best credit and debit cards for those considering holidaying abroad this year and might be a little out of the loop.
Best debit cards
Chase Bank is very much the new kid on the block when it comes to debit card.
Having launched in the UK in September last year, it has manage to hoover up more than half million customers within its first eight months.
No fees or charges: When abroad, Chase won’t charge for using its account. Its currency converter uses Mastercard’s exchange rate, with no additional transaction fees or mark-ups.
This as in part been down to the plethora or perks that come from, holding the account including the fact that it has zero fees and charges when used abroad.
Its currency converter uses Mastercard’s exchange rate, and there are no additional transaction fees or mark-ups.
There are also no charges from Chase for cash withdrawals at ATMs anywhere in the world – unless of course the ATM is one that charges any withdrawal.
Chase allows its customers to withdraw up to £500 each day from cash machines, however, when travelling abroad it allows for a maximum of £1500 to be withdrawn each calendar month.
Numberless: The Chase debit card doesn’t have a number. This means a smaller risk if the physical card is lost and a new card number can be generated straightaway, meaning a customer can continue to use the card digitally.
Chase also allows new customers to earn 1 per cent cashback on all eligible debit card spending during the first 12 months of having an account – this includes when spending abroad and of course when booking flights.
There are no fees to open the Chase current account and for worried about losing the card whilst travelling may like that is is a numberless debit card.
Instead, card details are stored behind a secure login on the Chase app, so customers don’t put their account details at risk if they lose their physical card.
Starling Bank’s current account offers both fee-free debit card withdrawals, and card spending abroad.
Just like Chase, it passes on Mastercard’s real exchange rate, and doesn’t add anything on top.
It does limit cash withdrawals to six each day, with a daily limit of £300, however – so it’s worth bearing that in mind if you intend to exceed that amount on any given day.
There aren’t many other perks that come with the account, but Starling has won huge acclaim for its customer service and app.
The debit card that comes with the Starling account doesn’t charge for card spending or cash withdrawals, wherever it is in the world you journey to
It was voted the best current account provider at the British Bank Awards in 2019, 2020 and 2021 and earned the best customer score in the latest Which? Survey.
Its current account can be downloaded through a smartphone app and can now also be managed online, and pays 0.05 per cent interest on up to £85,000.
It offers instant spending notifications, compartmentalises spending into categories and lets account holders create dedicated ‘spaces’ for their savings.
In terms of overdraft, the bank charges interest rates of 15 per cent, 25 per cent and 35 per cent for arranged overdrafts depending on a range of factors including after an assessment of your credit file.
|Debit card||Monthly cost||Transaction cost in Europe/worldwide||Withdrawal fee in Europe/worldwide|
|Starling Bank Current Account||£0||£0||£0|
|Chase current account||£0||£0||£0|
|Metro Bank Current Account||£0||£0 in Europe but 2.99% worldwide||Inside Europe £0 but outside Europe 2.99% fee + £1.50 non-sterling cash fee|
|Virgin Money M Plus Account||£0||£0||£0|
Metro does not charge customers for debit card payments or cash withdrawals anywhere in Europe.
However, for those looking to travel further afield, this may not be the best option.
In countries outside of Europe, there will be a non-sterling transaction fee of 2.99 per cent on purchases made, as well as a non-sterling cash fee of £1.50 on top of a 2.99 per cent transaction fee for any cash withdrawals from ATMs.
The Metro account offers arranged and unarranged overdrafts with a fairly high interest rate of 34 per cent APR.
But in any given month, Metro says it will never charge you more than the monthly cap of £60 for charges relating to an unarranged overdraft.
The Virgin Money M Plus debit card provides customers with free withdrawals and card payments outside the UK.
Those switching to its Money M Plus Account can now benefit from 20,000 Virgin Points that can be spent via Virgin Red, as well as interest of 2.02 per cent on current account balances up to £1,000.
Switchers can also benefit from 2.02 per cent on balances up to £1,000.
Virgin Money current account customers also have access to a market leading easy-access linked savings account, paying 1.56 per cent on balances up to £25,000.
Arranged and unarranged overdraft rates range between 19.9, 29.9 or 39.9 per cent based on credit score.
Virgin says that most applicants will be offered the lower 19.9 per cent rate.
Those switching to the Virgin Money account will be paid 2.02% on balances up to £1,000 for the first year.
Nationwide’s debit card for its FlexPlus current account offers fee-free spending and cash withdrawals abroad.
The FlexPlus account also includes worldwide family travel insurance, mobile phone insurance, and UK and European breakdown cover.
However, it does come with an account fee of £13 per month.
To help stomach the cost, Nationwide is currently offering cash bribes of £100 to new customers who switch across. For current Nationwide members who wish to switch to this current account from another, the bribe rises to £125.
For anyone worried about dipping into their overdraft, the interest rate is 39.9 per cent per year.
Monzo customers can use their debit card for free when abroad.
However, there is a 3 per cent fee if you withdraw more than £250 cash in 30 days in the UK and European Economic Area (EEA).
Outside of Europe, customers will be hit by the 3 per cent fee if they withdraw more than £200.
For a £5 monthly fee, Monzo customers can opt instead for the Monzo Plus account which will enable them to withdraw up to £400 for free, anywhere abroad, each month.
For those concerned about the interest they might be charged when dipping into their overdraft, Monzo offers rates of either 19, 29 or 39 per cent, determined by your credit score.
An alternative option?
Revolut offers a prepaid card you can manage your account from an app on your smartphone.
It’s prepaid contactless Visa card can be used abroad without subjecting you to charges every time you spend or withdraw money.
Once you deposit money into your account, you can then choose to exchange it into the currency of your choice.
The great benefit here is that you can lock in an exchange rate at a given price before you travel. Of course this may or may not work out to be beneficial.
Equally you can just leave it as sterling and when you use it abroad Revolut will apply the exchange rate at the given moment you make each transaction.
Another great money saving perk by Revolut is that it allows you to exchange currencies at the interbank rate – the rate at which banks transfer money between themselves.
However, this is only possible on weekdays. At the weekends, Revolut says it does charge a small markup fee.
Revolut’s free account also only allows for up to £200 to be withdrawn from ATM’s each month with a maximum limit of five withdrawals. After that you’ll be subject to a 2 per cent fee – albeit the minimum charge possible per withdrawal is £1.
Those prepared to pay for its £6.99 a month account will see this limit doubled to £400.
Best credit cards
A specialist travel credit card won’t charge you extra for spending abroad
This card has no extra charges for spending abroad, and does not charge for withdrawing cash anywhere in the world.
There is also no annual fee – so there are zero extra costs as long as you pay off your balance in full every month.
While there is no fee, interest is charged immediately at the card’s standard rate of 19.9 per cent on cash withdrawals and spending abroad. You can minimise the cost by repaying in full as soon as possible or avoiding withdrawals altogether.
Depending on your credit score, applicants may be given a higher interest rate of 27.95 per cent when withdrawing cash. In either case, it’s crucial to pay this off to avoid being charged daily.
You will be charged £12 if you pay your balance late, have a payment returned or go over your limit.
|Credit card||Cash withdrawal fee min % / £ (per withdrawal)||Foreign usage Europe / worldwide transaction fee||Purchase APR||Interest on cash withdrawals|
|Halifax Clarity Credit Card||0%||0%||19.9%||19.9%|
|Virgin Money Travel Credit Card||3%||0%||21.9%||27.9%|
|Santander All in One Credit Card||3% / £3||0%||23.7%||29.9%|
There is no annual charge and no fees when using the card abroad, and you’ll be able to withdraw cash from an ATM without any charges.
The card comes with 0.25 per cent cashback on your everyday spending. The cashback is paid directly into your account. This will be credited annually to your statement or on your request.
You can also get up to five months of Apple Music, Apple TV+, Apple News+ and Apple Arcade for free, with your new Barclaycard – although this continues as a paid subscription after trial.
Watch out for: Remember to pay it off any cash withdrawals right away or you’ll be stung with a 22.9 per cent APR.
Late payments will incur a £12 charge, but it will not charge this fee more than four times in a year.
The Zopa credit card does not charge a foreign transaction fee when used abroad.
Zopa does however charge a fee of £3 per cash withdrawal from an ATM, regardless of whether the customer is in the UK or abroad.
It will also charge interest daily on cash withdrawals, so it’s vital to pay this off as soon as possible.
It also charges a missed payment fee of £12 if you don’t make your minimum monthly payment on time.
Those who fail to pay it off in full each month will be subject to a rate of 34.9 per cent.
On top of having no transaction fees on any purchase made abroad, this card also offers 0.5 per cent cashback on spending – although there is a £3 monthly fee associated with it.
Customers should be aware that they will incur a 3 per cent charge when withdrawing money from an ATM.
Another benefit of this card is that it charges 0 per cent interest on balance transfers for 26 months from account opening, with no balance transfer fee and 0 per cent interest on purchases for 20 months from account opening.
A balance transfer credit card allows people to pay off debts by transferring everything they owe over into this card – up to the maximum credit limit.
At the end of the 0 per cent period, interest will be charged on any outstanding balances and new purchases at the standard rate of 17.9 per cent per annum.
For those who make a a late payment they will incur a £12 charge whilst a £12 fee also applies for those going over their credit limit.
Santander’s All in One credit card is one option if you are willing to pay the £3 monthly fee.
There is no annual fee and you won’t pay foreign transaction fees when you use this card abroad.
The card comes with a low APR of 12.9 per cent which could come in handy if you forget to pay it off.
However, your actual credit limit and APR may vary depending on our credit assessment of you. It may be that you are given a higher APR of 19.9 per cent.
For those who make a a late payment they will incur a £12 charge whilst a £12 fee also applies for those going over their credit limit.
What if you prefer taking out cash before you travel?
For some, holding foreign notes is an exciting part of a trip – many travellers are likely to take a combination of cash and card.
Exchanging cash can provide some peace of mind before travelling, but when doing so it is vital to secure a decent exchange rate.
Using comparison sites will help you ensure you make your money go further than it might otherwise do, were you to exchange your sterling at the airport.
Most specialist currency exchange companies will let you pick it up in person – and ordering in advance can boost the rate. Better still, you don’t have to pay for it until you pick it up.
Many foreign exchange shops closed in the pandemic, so it is worth checking if somewhere you’ve used before and trust is still operating before heading there.
Remember to avoid leaving it until you get to the airport, where you will receive a far worse exchange rate (unless you’ve ordered in advance). It is also usually worth avoiding the banks – you’ll usually get a better rate at a high street specialist or a supermarket bureau.
Finally, avoid using a credit card to pay for your currency as it will be classed as a cash withdrawal which typically comes with fees and hefty interest as soon as you make the transaction.
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