Concerns about the risks of carrying cash and a lack of understanding of local currencies mean that millions of British holidaymakers use credit cards to make purchases when on holiday abroad. Whether they are paying their hotel bill, eating out in restaurants or stocking up with souvenirs, paying with plastic helps tourists to avoid the worry of counting out unfamiliar bank notes. Using your credit card on holiday used to mean paying more for every transaction. Typically credit card companies add around 2.75% to the cost of every transaction made abroad. However, new credit cards introduced by Capital One, the Post Office, Nationwide, Halifax, Saga and Aqua are bucking this trend and leading the charge in scrapping additional charges for consumers who use their credit cards overseas.
Capital One’s Aspire World is a credit card that has been designed with the traveller in mind. Purchases made in foreign currencies do not attract any fees, while transactions in pounds sterling earn the credit card user up to 1.25% cashback. On this credit card, cashback is tiered. You will earn a higher percentage of cashback as your spending on the card increases. Over the course of a year, cashback on purchases up to £6,000 is 0.5%, between £6,000 and £10,000 it rises to 1.0% and purchases above £10,000 attract cashback at 1.25%. At your first anniversary, the cashback will return to 0.5% and will increase in line with these thresholds. Withdrawing cash from an ATM, whether at home or abroad, will still attract fees. The APR on Capital One’s Aspire World credit card is 19.9% and there is no annual fee.
The Post Office Platinum credit card does not charge fees on any transactions conducted in a foreign currency. As an added bonus, there is no cash fee when the Post Office Platinum credit card is used to buy holiday cash at a Post Office counter. You can then have the convenience of a no-fee credit card for large purchases, such as your accommodation or restaurant bills, coupled with local currency for small purchases, such as snacks and souvenirs. Fees and higher interest rates attach to cash withdrawn from ATMs. The Post Office Platinum card has an APR of 16.9% and has no annual fee. It offers 14 months interest free on balance transfers made within 3 months of opening your account. In addition, purchases made within the first 3 months are also interest free. The Bank of Ireland UK provides credit card services for the Post Office.
The Nationwide Select credit card offers unlimited purchases abroad with no fees, up to your agreed credit limit. All purchases made in pounds sterling attract cashback at a rate of 0.5%. In addition, this card has attractive zero percent introductory offers, including 0% interest for 20 months on balance transfers made within 3 months of opening the account. For the first 12 months, purchases made with this credit card will attract interest at 0%. The APR for this card is a competitive 12.9%.
The Halifax Clarity credit card has no fees on foreign currency transactions and offers a low APR of 12.9%. It differs from the majority of credit cards by not charging a fee or higher rate of interest on cash withdrawals from ATMs.
If you are over 50, the Saga Platinum credit card offers the opportunity to carry our transactions abroad without being hit with additional fees. This card offers interest free balance transfers and purchases for the first 9 months. In addition to a low APR of 11.9%, this credit card offers holders the chance to secure benefits when booking a holiday via Saga, at Saga resorts or on board Saga cruise ships. Saga credit cards are provided by Allied Irish Banks.
The Aqua Advance credit card, which has been designed for consumers who have hit a setback with their credit rating, does not charge fees on transactions that take place abroad. Initial credit limits on this card are likely to be lower than on standard credit cards, with an APR of between 34.9% and 49.9%, depending on circumstances. If you maintain regular payments, the APR reduces year on year until it reaches 19.9%.
With consumers increasingly aware of what credit costs them, credit card companies that continue to charge fees on foreign currency transactions will come under increasing pressure to change their terms and conditions.
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Laura Ginn understands why credit cards designed for use abroad are such a hit with holidaymakers. She knows that when looking for the best credit card companies to sign up to she can find more info on uSwitch about the different options open to her.