7 smart ways to use plastic on holiday

By Marianne Curphey

unused-credit-use-or-lose

Britons love to travel, and more are doing so each year. Packing your credit cards for your next trip can save you money and headache on your holiday. 

According to the Association of British Travel Agents (ABTA), 86% of Britons said they took a holiday (either at home or abroad) between August 2015 and August 2016. Of those, 56% took a holiday abroad, and many people are taking more than four holidays abroad each year. 

While abroad, nearly half of travellers over age 55 prefer to use a credit card to pay for purchases, along with 31% of those aged 25-34 and 13% of those aged 18-24, according to a 2017 Halifax study. 

Credit cards, which offer many protections and travel-related perks, may protect you and/or help you cut costs on your travels if you use your cards responsibly. Here's how to use your credit cards to your best advantage while you travel. 

Credit cards remain the safest way to pay abroad
When you use your credit card abroad, you get the same added protection under Section 75 that you would receive at home.

Section 75 means that if you use a credit card to pay for something that costs between £100 and £30,000, the credit card provider is jointly liable with the retailer for any ensuing problems. Only credit cards offer this benefit, not debit or pre-paid cards.

"You do get extra protection with a credit card, which might explain why these products remain so popular for use abroad," said Richard Purnell, former senior press officer for The UK Cards Association.

Additionally, they are easy to carry and use, says Philip Pearson, an independent financial adviser with P&P Invest.

If you lose your card while abroad, or if it is stolen, it is easy to call your bank and have your account closed, and you are protected by zero liability policies as long as you alert your issuer right away. With some banks, you may even be able to get an instant, virtual replacement card.

Using your cards wisely on holiday
1. Pack a mixture of cash, credit, debit and pre-paid cards.
Sarah Pennells, creator of Savvy Woman, the UK's leading money website for women, says this is what she personally does when travelling.

"I take cards from different banks, just to spread the risk, and I do take some cash as well, with the option to withdraw more cash on my debit card if necessary," she says. "I don't take out cash using my credit card because I'll be charged extra."

She also advises taking a pre-paid card if travelling to countries where crime is higher or where there is a higher incidence of card fraud.

"These are useful, but check the terms and conditions and fees," she says. "You don't want to have to pay a fee to access any cash that is left on your card at the end of the holiday."

Having a bit of cash for emergencies is also useful, and it's wise to have this on hand before you arrive at your destination to avoid cash advance charges or ATM fees with foreign transaction expenses piled on as well.

"I had to withdraw cash to pay for petrol in Italy when an automated garage refused to accept my debit card," Pennells says. "In the UK, we get used to paying for most things by card and not carrying much cash. We also get free cash withdrawals, but that is not always the case in other parts of Europe and the world."

2. Take a card or two with travel-specific benefits.
It also may be worth getting a card that charges no foreign transaction fees (sometimes called foreign exchange fees), or a card that offers other travel-specific benefits, such as assistance with travel arrangements or concierge services.

3. Take a spare credit card.
You'll be glad you have a spare card if your primary card is lost or stolen, or you use it to pay for a hotel or hire a car, putting you close to your spending limit. It may be wise to keep this card in a separate bag, with another person in your group or in your hotel safe, so that if your wallet is stolen, the thief won't run off with all your payment tools. 

4. Avoid a frozen card.
Tell your bank or credit card provider you are travelling to avoid having your card declined in shops and restaurants. 

5. Know your fees before you leave.
Check what fees your issuer charges while you're still in the planning stages of your trip. You may have to pay a fee if you withdraw cash via an ATM. This can amount to 3% of the purchase price or a £1.50 fee each time you spend. 

6. Request to pay in local currency.
If you pay by card, ask the retailer to put the transaction through in the local currency rather than sterling. This practice, known as dynamic currency conversion, allows you to pay for items in your own currency. However, the exchange rate is often less favourable than that offered through your credit or debit card. 

7. Sign up for a card protection service.
Finally, Jasmine Birtles, founder of the money website MoneyMagpie.com, says if you want extra protection, you can sign up for a card protection service. The service allows you to make a single call to have all your card accounts closed and replacement cards ordered, and you also may be able to get protection on a range of other personal items and documents. These services will cost you a small fee, but it's likely a small price to pay for peace of mind.

See related: Points chasing: manufactured spending risks, rewards, Guide to travel rewards schemes

Updated: 22 August 2017