Banking, loans and cards

How to use your cards abroad

Whether you’re planning to flash the plastic during a well-earned foreign holiday or using your card on an overseas business trip, knowing how best to use it can help prevent you being stung by unexpected charges when you get home.

Credit and debit cards are certainly not all the same when it comes to overseas use, and some unwitting travellers find the cost of their trip is much higher if they don’t use their cards properly.


Credit cards

Most credit cards charge you a fee for every purchase you make – typically up to 3%. Over the course of a long trip away, that can cost you quite a bit. There are a few who don’t, and if you are a regular overseas traveller, it could be worth applying for one of these cards from the likes of Halifax or Nationwide.

If you buy anything worth more than £100 with a credit card, your card company will be jointly liable under the Consumer Credit Act if anything goes wrong. That little bit of extra protection can be very reassuring.

But you should resist using your credit card to withdraw cash, unless it’s an emergency. Virtually all cards will charge you at least 3% of each withdrawal you make, with a minimum fee of at least £3 a time. And as with cash withdrawals made in the UK on a credit card, you will be charged interest from the moment you make the withdrawal.


Debit cards

If you do find yourself short of cash and you need to pop to a bank, it’s normally best to use a debit card. Most debit cards charge you two fees for every withdrawal – a cash withdrawal fee and something called a loading fee – but because you will be withdrawing money from your bank account rather than borrowing it from a credit-card provider, you won’t be charged interest.

It is worth checking with your bank before you travel what its charges are. Some card issuers charge you a set amount for each withdrawal while others apply a charge based on a percentage of what you take out. If your bank charges you a set amount for each time you use a cash machine, you’ll be better off making fewer larger withdrawals rather than a lot of smaller ones.


Dynamic currency conversion

This term refers to the option of paying for goods, services and food in your own currency rather than in the local currency.

That might sound attractive – at least you will know there and then how much your card will be charged – but it is almost always the wrong option.

If you opt to pay in sterling, shops, car-hire firms and restaurants will convert your bill using their own rate, and that will almost certainly be less competitive than the exchange rate your credit card or bank will use.

“Each year, holidaymakers are being caught out by the hidden charge of DCC, which adds pounds to their overall holiday bill,” said Graham Pilkington, of Nationwide.

“Even though many card providers charge foreign usage fees, they will generally be lower than the average fee charged by converting the payment to sterling.

“Often there is no way of telling what exchange rate and fee you will be forced to accept by choosing sterling. It may be best to stick with your card provider, which will be clear and consistent about the fees it charges you to pay for goods and services abroad.”

Mr Pilkington said one tip was to make sure you know how to say “I want to pay in the local currency, please” in the relevant foreign language.