Best cards for overseas spending
Sterling has drifted lower during the second half of 2016 which is bad news for travellers, as wherever you're heading, you’re likely to get less foreign currency for your pound.
Although the pound has recovered some ground in the last few weeks, 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
MBNA has stopped offering its Everyday Plus Card to new customers, but if you have one it's worth holding on to it. The card has no fees for overseas transactions or cash withdrawals, but you'll start racking up interest at 7.4% APR representative.
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 Be aware that you will pay interest on any cash withdrawn from the date of transaction (at a rate of between 18.9% APR and 25.9% APR depending on your credit rating). There are no promotional 0% balance transfers or 0% purchase deals with this card.
The Platinum Travel card, from Barclaycard, charges no fees on foreign purchases or ATM cash withdrawals until 31 August 2018. However be aware that for cash transactions you’ll start paying interest immediately, at 27.9% APR. For normal purchases the interest rate is 11.9% APR.
The Saga Platinum Credit Card is also very attractive, though its only available to people aged 50 or above. The card charges no fees to spend abroad, though you'll be charged interest on cash withdrawals, plus a 2% fee. The APR is 11.9% representative. There's also 0% interest to pay on purchases and balance transfers for the first nine months. The balance transfer fee is 3%, or £90 for a £3,000 balance.
Best debit cards
Metro Bank's 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.
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.
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.
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.
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.
Moving money from one account to another, whether switching bank accounts or more likely transferring the outstanding balance on your credit card to another card that charges a lower – or 0% – rate of interest. Some card providers may charge a transfer fee that can be a percentage of the balance transferred.
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%.