Best cards for overseas spending
Finding a cost efficient way to exchange your cash can be a good financial move if you’re looking to keep your travel costs down.
The cards you’ll find on this page will give you a better rate than you’ll get at the vast majority of bureaux de changes, not to mention the security benefits plastic has over cash.
Remember, it's often sensible to pay for purchases when you're abroad by credit card – if anything untoward does happen, you will usually be covered by your provider for purchases over £100. But many cards charge extortionate rates of interest or per-transaction charges on spending outside the UK, so finding the right card is key.
If you're given the choice to spend in pounds or the local currency, always pick the local currency. If you don’t, you’ll pay the expensive local exchange rate set by the retailer, which is a sneaky way to hike the price you’ll pay.
Best credit cards
The Halifax Clarity Credit Card remains a firm favourite with travellers as there are no fees to use it for purchases or cash advances anywhere in the world. Be aware that you will pay interest on any cash withdrawn from the date of transaction at a rate of 18.9% APR.
There are no promotional 0% balance transfers or 0% purchase deals with this card.
The Creation Everyday Card also has no fees on international spending, across the whole world. It has a representative 12.9% APR and charges interest on cash withdrawals from the day they are made.
Best debit cards
The Metro Bank current account is free to use in mainland Europe. If you go any further afield you'll pay transaction fees of 1.9% on any debit card purchases, and a £1 fee for any cash withdrawals. You'll have to sign up for an account in branch, which are mainly in London and the South East.
Finally, the Nationwide Building Society Flex Plus Account charges no fees to use cash machines in other countries, though there’s a 2% fee for any transactions in a foreign currency.
This is a packaged bank account, which includes annual family worldwide travel insurance amongst its range of benefits, although the account does come with a £10 monthly fee.
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card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account.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 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.
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.