Taking your card on holiday? Using it overseas could cost you

By Emma Lunn

If you're jetting off overseas to escape the dismal British summer, it's important to take the right credit card. Taking the wrong one could bump up the cost of your holiday.

Here are some tips for bringing your cards along on your travels -- and some cards that will give you a break on foreign transaction fees.

Tips for using plastic abroad
Even if you don't think you'll need to borrow money, it can be a good idea to take a credit card on holiday for emergencies. Before the card leaves your wallet, however, keep these things in mind: foreign-transaction-fees

Cash advances are costly: Using a credit card to withdraw cash anywhere, at home as well as abroad, can be a costly mistake. For one thing, you'll be charged interest from the day of the transaction rather than after the standard 50- to 60-day grace period. Also, the cash advance balance may be charged at a higher interest rate than purchases on the card. Most cards also charge a cash withdrawal fee.

Merchants might not give you the best deal: Whatever type of plastic you use overseas, watch out for dynamic currency conversion. Dynamic currency conversion allows the overseas retailer to give you the option of paying in pounds sterling rather than in the local currency. Yet this can end up being more expensive, because the merchant sets the exchange rate -- which may less favourable than the official exchange rate.

"Holidaymakers should always insist on paying for goods in the local currency, as failing to do so could end up costing more through less competitive exchange rates," says Az Alibhai, head of credit cards at the Post Office.  

In addition to verifying the amount of the purchase and currency being used prior to the transaction, check your receipt to ensure you've been charged the correct amount in the local currency, Alibhai advises.

"Raise any discrepancies there and then, as challenging incorrect payments at a later date may prove difficult," Alibhai says.

Keep your card safe: Be extra cautious when using your credit card abroad. If your credit card provider contacts you to verify transactions, always arrange to call the provider back using the number printed on your card in case the call is from a fraudster. In addition to storing your card provider's contact number in your phone, always keep a written note of the number, just in case you lose your mobile.

When paying for food or drink, keep your card close by.

"In a restaurant or café, always ask for the payment terminal to be brought to you. Never let your card out of sight," advises Alibhai, "And never leave your card behind the bar to run a tab."

Three affordable cards for travel
If you charge abroad, your card might charge you extra -- in the form of foreign transaction fees. The solution? Find a card that waives them. Here are three options:

Post Office MasterCard: In addition to not charging foreign loading charges on purchases abroad, the Post Office credit card doesn't charge a cash advance fee if you use the card to buy travel money at the Post Office. This is in contrast to most credit cards, which treat buying foreign currency as a cash transaction (rather than a purchase) and charge an extra fee.

The Post Office card comes with a typical annual percentage rate (APR) of 16.9% and no annual fee.

Sainsbury's Gold credit card: The Sainsbury's Gold credit card doesn't charge any fees for paying for goods or withdrawing cash abroad. Keep in mind, however, that, when you make a purchase, you will pay in pounds sterling at the MasterCard exchange rate. Like the Post Office card, the Sainsbury's Gold doesn't charge for buying foreign currency on the card.

Other travel benefits include annual worldwide travel insurance for your family, including winter sports cover.

The Sainsbury's Gold card comes with a monthly fee of £5 and typical representative APR of 20.9%.

Saga Platinum credit card: The Saga Platinum credit card offers 0% foreign currency fees on transactions made abroad. Cash withdrawals abroad will cost 2% of the withdrawn amount or £2, whichever is greater.

The card also offers 0% on purchases for the first 9 months and 0% on balance transfers for nine months (with a 3% balance transfer fee). The card has a comparatively low APR of 11.9% and no annual fee.

Cardholders can also get discounts on Saga cruises, holidays and hotels if they pay using the card.

See related: If your airline loses your luggage, will your credit card come to the rescue?, Editor's pick: Travel rewards cards with no annual fee

 

Published: 25 July 2012