Are travel credit cards the best way to spend money while abroad?
Credit cards with no foreign transaction fees are oftenthe cheapest way to buy something while abroad. That's because theexchange rate you're getting is about the best you can findas a member of the public - with the Visa and Mastercard rates almost identical to those currency traders use for international transactions. Another major benefit is that you getautomatic purchase protectionon things you buy worth more than £100 and up to £30,000 thanks to UK credit card laws. However, credit cards for travel won’t be the most suitable option for everyone. One of the big drawbacks is that they often don’t offer 0% deals on purchases, which means that unless you clear your balance each month, you’ll pay interest on all your holiday spending. Some credit cards might also charge monthly or annual fees, and if you’re late making a repayment or miss it completely, fees also apply. Missing payments risks hurting your credit score too. Not everyone will be accepted for a travel credit card. To get the best deals, you usually need a good credit record. You also need to apply for your credit card in plenty of time.
Fortunately, there are plenty of alternative options to consider. The first is a specialist bank account. Many digital-only providers, such as Starling and Revolut, offer bank accounts with debit cards that are free to use overseas, and you’ll benefit from the Visa or Mastercard exchange rates while spending. In addition, a travel bank account generally does not charge you anything for cash withdrawals (neither fees nor interest) – although some come with a limit on how much you can take out of the ATM. Another option is a prepaid travel card. These can also be free to spend on and make cash withdrawals with, but you won’t always get the best exchange rate with them. However, if you can find one that doesn’t charge a fee for loading or holding money on it and that comes with Visa or Mastercard exchange rates, it will be as cheap as using a travel credit card. Bear in mind that however you pay for items, if the retailer offers to convert the payment into pounds rather than the local currency, ask to stick to the local currency. Retailers typically offer poorer exchange rates, so if you pay in pounds sterling, you’ll pay more for your purchase than expected. Finally, it’s worth taking a small amount of travel money with you to cover any expenses that can’t be paid for on plastic.
