Best cards for holiday spending
You've packed your suitcase, bought your travel insurance and sorted your airport parking, but before you go you should also make sure you've packed the right plastic.
We've all heard horror stories of sun-seekers returning from their getaway only to be hit hard in the pocket because they didn't realise how much they'd be charged for paying on plastic abroad.
Fortunately, Moneywise has looked through all the options available for savvy holidaymakers and come up with a list of the best cards so you can avoid coming home to any nasty shocks.
Top of the best-buy table is the Halifax Clarity Credit Card. With a competitive APR of 12.9%, there is no charge for ATM withdrawals when you're abroad or transaction fee on purchases.
The Post Office Platinum Card has an APR of 17.8% plus a 2.5% fee for using an ATM. The interest on cash transactions is charged at 27.9% but you will get 0% on balance transfers for the first 18 months.
Next up is the Metro Bank Card, which comes with an APR of 13%, along with free purchases and ATM withdrawals in Europe, but you must have a Metro Bank current account to apply for the card. If you are holidaying outside Europe, you will be charged 1.9% on purchases, as well as £1 per transaction for using an ATM.
Saga's Platinum Card comes with a very competitive APR of 11.9%, and you won't be charged any fees for purchases. There is a 2% handling fee for cash machine withdrawals and you can only apply for it if you are aged 50 or over.
The Nationwide Select Credit Card also is fee-free on purchases and ATM withdrawals.
|Credit cards||APR*||Non-sterling purchases||Non-sterling cash withdrawals||ATM charges for overseas withdrawals|
|Halifax Clarity Credit Card||12.9%||No charge||No charge||No charge|
|Post Office Platinum Credit Card||17.8%||No charge||No charge||2.5% handling fee (min. £3)|
|Metro Bank Current Account||13%||1.9% (free in Europe)||1.9% (free in Europe)||£1 per transaction (free in Europe)|
|Saga Platinum Card||11.9%||No charge||No charge||2% handling fee (min. £3)|
|Nationwide Select Credit Card||15.9%||No charge||No charge||2.5% handling fee (min. £3)|
*Based on a credit limit of £1,200
Norwich & Peterborough Building Society's Gold Classic current account charges no fees for cash withdrawals made using its debit card, or purchases, and its insurance protects you against the loss of bags, keys and cash abroad and at home. However, you'll have to pay in £5 a month or hold a minimum balance of £5,000 to get the account.
The Metro Bank debit card is fee-free in Europe but charges 1.9% for purchases and ATM withdrawals everywhere else.
The Nationwide FlexAccount charges a fee of 2% on purchases and £1 per ATM withdrawal and comes with UK and European travel insurance. Its authorised overdraft rate of 18.9% AER is also competitive but you'll face a monthly charge of £20 for going over your arranged borrowing limit.
You'll pay 2.75% on non-sterling transactions with the M&S Bank current account but you won't be charged for withdrawing money from a cash machine.
|Debit cards (current accounts)||Non-sterling purchases||Non-sterling cash withdrawals||ATM charge for overseas cash withdrawals|
|Norwich & Peterborough Gold Classic||No charge||No charge||No charge|
|Metro Bank Current Account||1.9% (free in Europe)||1.9% (free in Europe)||£1 per transaction (free in Europe)|
|Nationwide FlexAccount||2%||2%||£1 per wthdrawal|
|M&S Bank Current Account||2.75%||2.75%||No charge|
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.
Where APR is the rate charged for money borrowed, Annual equivalent rate is how interest is calculated on money saved. The AER takes into account the frequency the product pays interest and how that interest compounds. So, if two savings products pay the same rate of interest but one pays interest more frequently, that account compounds the interest more frequently and will have a higher AER.
This is used to compare interest rates for borrowing. It is the total (or “gross”) interest you’ll pay over the life of a loan, including charges and fees. For credit cards where interest is charged at more frequent intervals, the APR includes a “compounding” effect (paying interest on interest). So for a credit card charging 2% interest a month (equating to 24% a year), the APR would actually be 26.82%.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.