A credit card is also a safer alternative to carrying large amounts of cash while on holiday. However, the last thing you want is to pay mysterious fees whenever you take cash out or pay for a meal.
One fee you should look out for when using a credit card, especially abroad, is a non-sterling cash transaction fee. You might just need a little cash top-up to pay for a few drinks in a bar that doesn’t take cards. However, if you use the ATM you could incur a fee.
There’s also a non-sterling purchase fee. Let’s say you move down the street to a nicer bar that takes cards – there could still be a fee for spending in a foreign currency instead of sterling.
A retailer might give you the option of paying in sterling instead of the local currency...you’ll probably be charged a higher rate for the conversion.
To complicate things further, a retailer might give you the option of paying in sterling on your card instead of the local currency. This is called dynamic currency conversion. In one way it’s convenient because you can see on your bill exactly how much you’re about to spend, but bear in mind you’ll probably be charged a higher rate for the conversion.
It’s better to use a currency conversion app to understand how much you’re paying and avoid the charge by checking the bill before tapping to pay or entering your PIN. Then pay in the local currency if your card has no fees for non-sterling transactions.
If you decide to use the ATM anyway and accept the charges mentioned above, don’t forget that as soon as you make a cash withdrawal, you could be charged interest on it until you pay off your balance.
To put these fees into perspective, using the wrong sort of credit card abroad could go like this...
You take out £100 at a cash machine. You could be charged £3 extra for foreign usage, a £3 cash withdrawal fee, and £2 interest before you pay off the bill. That’s £8 just for taking out a bit of cash.
Multiply this a few times across a week-long trip and it’s easy to see how foreign transaction costs add up. If you use the right card, however, that money could pay for an extra meal or family activity.
As with all credit cards, it pays to be aware of how much borrowing using a travel credit card will cost you in total. If your repayments are too small, the interest will quickly wipe out any savings you made while abroad. One way to make sure you don’t miss a payment while you’re away is to set-up Direct Debits or standing orders to automatically pay bills. When it’s affordable, this can be a good idea whether you’re at home or on holiday.
That means you can claim money back from your credit provider if your travel company or supplier goes under. This could be especially useful if you plan to make big purchases on your credit card, such as flights or hotel rooms, as you might not have the same protection if you pay by debit or cash.
FAQs
Travel credit cards can offer significant rewards and benefits for travelers, including complimentary checked baggage, access to airport lounges, bonus points on travel spending and automatic elite status. Make use of all that your card offers to fully maximize the value of travel rewards cards with high annual fees.
What's the point of a travel credit card? ›
Travel credit cards make it easy to earn rewards — usually offered in the form of points or miles — for certain types of purchases. You can typically redeem your travel rewards for the big expenses associated with your next trip such as flights, hotels, car rentals and vacation packages.
Can I use a travel credit card for everyday purchases? ›
General travel cards
With these travel cards, you'll have a chance to earn points through everyday purchases and earn even more points through travel and dining purchases.
Is it worth getting a money travel card? ›
There are lots of reasons why you might consider getting a prepaid travel card. Some of the main advantages to having one are: Safety - It's better than carrying around large amounts of cash. If you lose your card, or if it's stolen, you can block it and transfer your unused funds to a new card.
What is the disadvantage of a travel money card? ›
Cons of Travelling with a Travel Card
Fees: There may be fees associated with certain travel cards1. These can range from fees to load and reload your card, purchase fees, issue fees, and fees when you decide to cash out any remaining balances.
What is the point of a travel card? ›
Travel credit cards don't usually hold foreign currency but offer perks such as international buyer protections, free insurance, airport lounge access and frequent flyer travel points.
Is a travel card with annual fee worth it? ›
The bottom line
If you're earning enough points or using those free night awards consistently enough to justify the annual fee, then it's worth paying. If these cards are collecting dust in your wallet or you find yourself going over budget to earn incentives, then they're not worth having.
Is it hard to get a travel credit card? ›
You can get some travel credit cards with a low credit score, but many premium travel credit cards require a credit score above 670.
What is the most accepted credit card for international travel? ›
Visa and Mastercard are usually accepted anywhere you can pay with a card. So if you want to use a Discover or Amex card abroad, you may want to bring a Visa or Mastercard along as well, just to be safe.
What is the point of a travel credit card? ›
Broadly defined, a travel credit card is a credit card that earns rewards on your everyday purchases that can be used towards travel expenses. Rewards can take the form of points or miles, which can be redeemed for travel expenses like airfare, hotel stays, car rentals and other travel-related expenses.
The exchange rate you get is set by Visa or Mastercard and is usually better than the high exchange rate margins set by travel money cards. But use your standard debit card, especially if it's from the Commonwealth Bank, ANZ, Westpac or NAB, and you could be in for some high fees and exchange rate margins.
How does a travel card work? ›
You use them to spend money in other countries and currencies instead of cash, travellers' cheques or your usual credit or debit card. You can load money onto the prepaid card using your regular debit card, a bank transfer or adding cash in person. When you take it abroad, you can: Withdraw money from cash machines.
Is it a good idea to use a credit card when traveling? ›
Credit cards typically provide better exchange rates than what you'll get from ATM machines and currency stands. Depending on your card issuer, your purchases might automatically qualify for insurance. This coverage doesn't simply apply to consumer goods — it also covers travel delays and lost luggage.
Should I buy a flight with a credit card? ›
Yes, it's better to use a credit card for flights, particularly if you have a travel credit card that offers bonus rewards and airline-related perks. Using a credit card rather than a debit card or another payment method makes it easier to book flights and can save you money with rewards.
Is it better to travel with cash or credit? ›
Cash is the best — and sometimes only — way to pay for bus fare, taxis, and local guides. If you'll be shopping a lot or settling bills at pricey business-class hotels, you might use your credit card more than I do — but you'll still be better off using cash for smaller purchases.
Do you save money with a travel card? ›
A travel money card is a popular way to spend when travelling abroad. There's no 'best' way to spend when travelling, but here are a few tips to help you save money: Don't exchange cash at the airport. It's much cheaper to withdraw money from an ATM with your travel money card.
