Using Your Credit Card Abroad
A credit card offers you the opportunity both to pay for goods and services and to withdraw cash whilst abroad. Credit cards are a quick, convenient and safe alternative to using travellers' cheques, and they remove the need for you to exchange cash while you travel. Although there is often a charge for using your card abroad, you may find that the convenience and flexibility it provides compared to cash and travellers' cheques outweighs the cost. Many credit card providers will also offer you additional benefits if you travel abroad with your card, such as free travel insurance.
Additional Benefits
Many credit card providers now offer special 'travellers' credit cards. Some of these cards come with higher interest rates, but there are additional loyalty benefits from which you can benefit. Benefits may include free travel insurance, low-cost cash withdrawals overseas and a free replacement card if yours is lost or stolen. You may wish to apply for a traveller credit card in addition to your regular card, to benefit from the advantages it offers you abroad. However, you should be prepared to repay the outstanding balance in full each month to avoid paying the higher interest charges that usually apply to these specialised cards.
Charges
If you make a purchase abroad using your credit card, for example if you pay for a meal in a restaurant, you will benefit from the same interest-free period that you enjoy in the UK. However, you will have to pay a charge to cover the currency conversion from the currency of payment into pounds sterling. This charge is referred to as a 'foreign usage loading fee'. It is typically 2.75 % of the transaction amount, subject to a minimum amount, for example two pounds. Some card providers will also set a maximum charge amount such as five pounds. The foreign usage loading fee applies to any transaction that requires a currency conversion, including purchases, cash withdrawals and travellers' cheques that are charged against your credit card. You should remember that interest accumulates immediately on cash withdrawals, and use of Automated Teller Machines (ATMs) usually incurs an additional fee, whether at home or abroad. For more details see article Credit Card Charges.
Fraud Abroad
Each year there are hundreds of millions of pounds stolen in fraudulent transactions abroad using UK credit cards. Despite the fact that you are on holiday, you should still follow the same fraud protection guidelines that you would use at home, such as keeping your cards with you at all times in a zipped wallet, or locked in a safe if you wish to go out without them. For more tips see Fraud Protection.
Prepaid Cards
As an alternative to your credit card, both MasterCard and VISA offer prepaid plastic cards. These electronic cards operate in the same way as credit cards, in that you may make purchases and withdraw cash abroad using a PIN or signature to verify the transaction. However, there is no credit limit nor borrowing available, and additional charges may apply. Prepaid cards work by 'pre-loading' the card with cash before you travel. When you then make a purchase abroad, the total is subtracted from your cash balance. For more details see Prepaid Cards.
