As we head towards August, many people’s thoughts will be turning towards their impending summer travel plans. Along with holidays abroad comes spending in a different currency. Today I am going to try and identify the very best card to use abroad this summer and beyond – looking at both the cheapest options and of course the best options for earning miles and points. But who said they have to be mutually exclusive?!
There are a vast number of cards on the market and it would be impossible to feature them all, with the various travel permutations, without making this article 5 pages long and turning Tricks of the Trade into a ‘mini Money Saving Expert’. I have picked out what I believe are the key cards to consider.
Get in touch and tell me about your favourite card if I’ve left it out.
Why shouldn’t I just use my regular debit/credit card abroad?
So that banks can’t enjoy charging you an extra non-sterling transaction fee – usually around 3% – on top of every transaction you make – that’s why! The majority of banks or card companies will also charge you a hefty fee for using a cash machine abroad, often a fixed charge + a further percentage of the amount you withdraw.
While it might seem insignificant to begin with, these charges really add up – especially if you are settling a substantial hotel bill at the end of your stay.
Take a 10-night stay at the JW Marriott in Miami for a family of four in August. That would cost roughly £3,250 – settling your bill with a regular (3%) debit/credit card will set you back an extra £100, for no good reason. And that is before you add in the extra charges levied on activities/meals/shopping etc.
Which is better: debit or credit cards?
Generally speaking, debit cards seem to dish out the most painful hits when it comes to tacking on extra charges. This is because they often add an extra fee per transaction on top of the 2.5-3% non-sterling transaction fee.
A Lloyds debit card, for example, charges £1 for each transaction (no matter the size) plus a 2.99% non-sterling transaction fee.
I would, therefore, recommend sticking with credit cards on this one – although I will show you how you can still ‘use’ your debit card without paying any of those fees shortly.
What are the cheapest cards to use abroad?
Credit cards – Non-miles/points earning
Barclaycard Platinum travel credit card
Annual fee: None
Transaction fee: None
Cash withdrawal fee: None
Interest rate: 18.9% on purchases and 27.9% on ATM withdrawals.
Comments: The ‘no fees’ on purchases or cash withdrawals is valid until the end of the promotional period; 31st August 2022. You can avoid paying any interest on non-sterling transactions made on this card by your statement date. A strong contender.
This card has a representative APR of 18.9% variable based on an assumed £1,200 credit limit.
Post Office Platinum Credit Card
Annual fee: None
Transaction fee: None
Cash withdrawal fee: 2.5% with a £3 minimum charge
Interest rates: 18.9% on purchases and 27.9% on cash withdrawals
Comments: A good card for purchases abroad but let down by its ATM withdrawal fees. Avoid if you regularly withdraw cash. Or consider withdrawing a lump sum at the beginning of holiday.
This example is based on a representative APR of 18.9% variable based on an assumed £1,200 credit limit.
Full info here
Halifax Clarity
Annual fee: None
Transaction fee: None
Cash withdrawal fee: None – although interest charged immediately. See below.
Interest rates: 18.95%
Current promotion: £20 cashback when you apply before 3rd September 2017 and make a foreign currency purchase before 30th September 2017. Purchase can be made online or abroad just must be non-sterling purchase. Bonus cashback applied to your account within 90 days of purchase.
Comments: An excellent option although interest is charged straightaway on ATM withdrawals even if paid off in full by statement date.
Anecdotal evidence suggests there are a couple of ways round this: Prepay your account into credit before making a withdrawal (I wouldn’t do this too often and risk Halifax’s ire to be honest). Alternatively, after withdrawing, make an immediate bank transfer to your account for the withdrawn amount – you should then avoid the worst of the interest charges.
This example is based on a representative APR of 18.9% variable based on an assumed £1,200 credit limit.
Credit cards – Miles and points earning
Lloyds Bank Avios Rewards Credit Card(s)
Annual fee: £24
Earnings rate: 1.25 Avios per £1 on the Amex and 0.25 Avios per £1 on the MasterCard.
Transaction fee: None
Cash withdrawal fee: 3% or minimum £3
Interest rates: 18.94%
Extras: Double Avios on your spend across both cards in the first 6 months. Upgrade voucher after £7,000 of spend in a cardmembership year.
Comments: This card is a real winner for me. It is the only card that allows you to collect Avios abroad, while paying no foreign transaction fees on purchases! Granted, the earnings rate on the MasterCard isn’t great, but then again it’s better than nothing. Worth having a backup plan for cash withdrawals though or it could get expensive.
Our full review of this card is available here.
This example is based on a representative APR of 23.7% variable based on an assumed £1,200 credit limit.
‘Prepaid cards’
Below are a number of ‘prepaid cards that allow you to load money onto them which you can then spend abroad at no/reduced cost. They are called prepaid cards because you do not require a bank account in order to use them – in reality, they function just like any other MasterCard does.
Curve
In truth, this card needs a much more in-depth review which will follow in due course but I will make do with a brief summary here.
Curve is rather unique in that it offers the ability to recharge transactions made using their MasterCard (pictured above) to any linked Visa/MasterCard in pounds sterling. This allows you to use any debit/credit card you like, abroad, at a greatly reduced rate. For example, say I wanted to use my HSBC Debit Card abroad but didn’t want to pay their 2.9% non-sterling transaction fee. I can go into the Curve app and add my HSBC card, I then shop using my Curve card as normal and Curve charges my underlying HSBC card in pounds at the daily MasterCard exchange rate + a 1% fee.
Annual fee: Free for the Blue card or £50 for the Black card which comes with a TUMI wallet.
Transaction fee: 1%
Cash withdrawal fee: Flat £2 per withdrawal.
Comments: I think the Curve card is a great option and have had one pretty much since it launched. I love the fact that I can toggle through my different cards and choose which one to charge a particular transaction to. It means I can also link my miles/points earning credit cards and earn points abroad for just a 1% fee.
ATM charges can differ, for full info see the FAQ’s section of the Curve website. A fuller review of the Curve card and its many features to follow.
Monzo
Annual fee: None
Transaction fee: None
Cash withdrawal fee: None
Comments: I have friends and family with this card who rave about it, although I am yet to test it myself. Essentially you can fund the card from a linked account and there are zero fees associated with using the card abroad – even for ATM withdrawals – which sounds pretty impressive.
Revolut
Annual fee: £5
Transaction fee: None
Cash withdrawal fee: First £200 each month is fee-free, 2% thereafter.
Comments: This is a very clever little app-based banking alternative. It allows you to hold balances in a number of different currencies simultaneously and select, using the app, which one you would like to use to pay for each transaction.
You can load the card via bank transfer/debit card which are both free. Alternatively, you can use a Visa/MasterCard credit card (and it will show as a purchase!) to top-up for just a 1% fee. This is a useful feature indeed.
What is the best card for collecting points?
All of the above is very useful if you are conscientious about getting the cheapest rates. But what if you aren’t too fussed and just want to earn the maximum amount of miles/points? Or you will be claiming back your expenses and want to know which card is the most lucrative? These next few cards are for you then…
American Express Preferred Rewards Gold Card
Annual fee: Free first year, £140 thereafter
Transaction fee: 2.99%
Cash withdrawal fee: N/A
Earnings rate: Double points i.e. 2 Membership Rewards (MR) points per £1 spent in a foreign currency.
Comments: MR points can be converted to Avios, Virgin Flying Club, Etihad and numerous other travel partners. Along with the HSBC card below it is the joint-best option for earning the most miles when spending abroad.
Our full review of this card is available here.
HSBC Premier World Elite MasterCard
Annual fee: £195
Transaction fee: 2.99%
Cash withdrawal fee: 2.9% with a minimum £3 charge.
Interest rates: 18.9%
Earnings rate: Double points i.e 4 Reward Points per £1 spent on non-sterling transactions. HSBC Reward Points convert to Avios, Etihad Guest, Singapore KrisFlyer and Cathay Asia Miles at a 2:1 ration making the earnings rate effectively 2 Avios per £1.
Comments: Assuming you meet with fairly strict financial requirements for an HSBC Premier account and are happy paying the fee to use the card generally, this card is a nice little earner.
Our full review of this card is available here.
This card has a representative APR of 59.3% variable based on an assumed £1,200 credit limit.
IHG Rewards Club Premium Credit Card
Annual fee: £99
Transaction fee: 2.99%
Cash withdrawal fee: 3% or £5 whichever is greater
Interest rates: 19.9% for purchases and 27.9% for cash advances (withdrawals)
Earnings rate: 4 IHG points per £1 spent on non-sterling transactions
Comments: This card is definitely not worth getting purely for spending abroad. The cash withdrawal charges, in particular, are substantial. If you have it anyway, is it worth using just for purchases? That will depend on how highly you value/wish to build up your IHG points balance. Personally, I would say not.
Verdict
It is clear then that it is definitely worth exploring the cheaper options out there. Even if you are just casual travellers – travelling a couple of times a year – these extra charges could soon run hundreds of pounds.
If I was pushed into a corner to choose my pick for the best card UK credit to use abroad, I would be tempted by the Halifax Clarity, particularly given the current cashback bonus. However, the potential faff surrounding interest on cash withdrawals means I would pick the Barclaycard Platinum travel credit card.
But, from a miles and points perspective, the Lloyds card is the clear winner. Its ability to earn Avios while still avoiding any foreign transaction fees (apart from ATM withdrawals) is unrivalled in the UK credit card market currently.
All that is assuming that you are looking for a card just for personal use. If someone else is picking up the tab though, the Amex Gold and HSBC Premier World Elite MasterCard are both strong options with their respective double points offerings – with the Gold card the cheaper option in terms of annual fee.
Disclaimer: The above information is intended solely as a helpful guide to the relevant products on the market and their various features. You should, of course, always conduct your own research as the recommendations provided within may not be suitable for your personal financial requirements.
Header image credit: nevodka / Shutterstock.com
5 thoughts