Are you a frequent traveller? Choosing the best travel credit cards for your trips can save you a significant amount of money. Michael Barton’s comprehensive guide compares the best travel credit cards in the UK, helping you make an informed decision.
If you’re planning to travel overseas, often the last thing you’ll think about is the best way to spend money abroad. This could be a big mistake, especially if you are taking a credit card with you.
Sure, credit cards offer extra protection, and the interest-free period could help you budget for your foreign spending. However, many credit cards levy hefty charges when you use them abroad. These can add up rapidly behind your spending. You might not even realise just how much until you receive a nasty surprise when you open your next credit card statement.
The solution? Use a travel credit card.
In this article, I compare the best travel credit cards. I also discuss the advantages and disadvantages of using them, and provide a list of the worst debit cards to use while you’re on holiday or business overseas.
Best Travel Credit Cards Summary
It can be beneficial to use a credit card abroad, but often your existing credit card won’t be the best.
The overall winner in our view is the Barclaycard Rewards Credit Card, but is it the best for you?
In this article, we walk you through a seven-step process to find the best travel credit card for you. This could save you hundreds on your holiday spending. We also discuss the best travel credit cards if you want to spend on a card, withdraw cash, or earn rewards every time you spend.
What Is a Travel Credit Card?
Most credit and debit cards can be used abroad. The bad news is that many of these charge high fees each time you do. Even if you get an almost perfect exchange rate, you could be charged a transaction fee of around 2% to 3%. You think you’ve spent £100, but it’s cost you £103.
That’s not the only charge, either. Many cards also charge a flat fee just for using your card abroad. Depending upon the card you use, this could be between 50p and £1.50. At only €5, a breakfast with coffee is exceptional value. Then the card provider takes £1.50. Ouch!
You don’t have to pay these fees. Not if you use a travel credit card designed especially for use abroad. Not only will you get a near-perfect exchange rate, but you’ll avoid all the charges, too. This could easily save you £100 or more while you’re on holiday.
A bonus with these cards is that you’ll benefit from extra protection under the Consumer Credit Act. For any purchase between £100 and £30,000, you’ll be able to seek compensation direct from the credit card provider if the product is faulty or the retailer goes bankrupt.
Spending on the Wrong Credit Card – The Real Cost
Whether you are using your card to make a purchase or to withdraw cash, you’re going to be shocked how the charges rack up.
Foreign exchange fees and transaction charges could add around £3 to a £30 lunch bill.
If you prefer to use cash, an ATM withdrawal of £200 could cost you around £6 on the foreign exchange fee and another £5 by way of a cash withdrawal fee. That’s without the interest you’ll be charged from the second you make a cash withdrawal.
Either way, you’re looking at charges of between around 5% to 10% on your spending. If you spend £1,000 while away, you will have paid the bank as much as £100.
No wonder the fat cats are on such high bonuses ─ it’s coming out of your pocket.
Sidestep the Fees with Travel Credit Cards
Cards that are designed for spending abroad don’t charge many of these fees. With most, you’ll avoid the foreign transaction charges. Many don’t charge for cash withdrawals (though you may be charged by the ATM provider). However, most credit cards will charge interest on cash withdrawals, just as they do when you use them in the UK. My advice here is never use a credit card to make a cash withdrawal while you’re abroad or in the UK.
One thing to be aware of is that, just like standard credit cards, some travel credit cards charge a monthly fee. On the other hand, many of the cards that charge a fee also offer rewards. These may include air miles, travel insurance, and cashback.
(Note that cashback isn’t given on balance transfers, money transfers, cash withdrawals, buying currency or travellers cheques, or any cash-like transactions you make such as money orders or wire transfers.)
Best Travel Credit Cards 2023
Which travel credit card is best for you depends on how you plan to use it. Five cards stand out.
1. Barclaycard Rewards Credit Card – The Best All-Rounder
I like this card for several reasons:
- No charge for withdrawing cash
- No foreign transaction fees
- 0.25% cashback on all purchases
- No interest on cash withdrawals providing you pay off the balance in full each month
If you’re an Apple user, you’ll also get five months of Apple TV+, Apple Music, Apple Fitness+, Apple News+ and Apple Arcade.
2. Halifax Clarity Credit Card – Best for New Accounts
The Halifax Clarity Card runs a close second to Barclays Rewards. Like Barclaycard Rewards, it does not charge foreign transaction fees. Also like Barclaycard rewards, you won’t get charged to make a cash withdrawal – though you will be charged interest on cash withdrawals from day one.
The unique selling point of the Clarity card is that you will receive £20 cashback on your first purchase with the card. It takes a while to be paid to you (180 days), but it is a nice feature.
3. Virgin Money Credit Cards – Best for Points
Virgin Money offers a range of credit cards, including the Virgin Atlantic Reward Credit Card and the Virgin Atlantic Reward+ Credit Card.
You won’t pay foreign transaction fees of cash withdrawal fees for either. With the Reward card, you receive 0.75 Virgin Points for every £1 you spend, and 1.5 points for every £1 you spend with Virgin Holidays or Virgin Atlantic. It’s double points for Reward+ cardholders.
Virgin points can be redeemed when buying Virgin flights or holidays, and spent at several high- street brands. If you want the Regards + card, there is an annual fee of £160.
118 118 Money Credit card – Best for Bad Credit
If you currently have a low credit score, the 118 118 Money Credit Card could be the best option for you.
While the interest rate charged is highest among the five that I’ve put under the microscope, there are no foreign transaction fees, no charges for cash withdrawals, and, like the Barclaycard Rewards Credit Card, you won’t be charged interest on any transaction provided you pay off your full balance each month.
The downsides include a £12 late payment fee and 5% fee on cash withdrawals, as well as a much lower credit balance than for other cards.
Never Use These Cards Abroad
Here are six more reasons you might consider taking a travel credit card rather than a debit card to spend money abroad. Six debit cards that could cost you as much as even the most expensive non-travel credit cards. Though some of the following charges may not apply if you are travelling in the European Economic Area (EEA), you should avoid using any of the following cards while travelling:
Bank of Scotland, Lloyds, Halifax
With a 2.99% foreign exchange fee and a 50p spending charge, you’ll quickly rack up unexpected costs. As if these aren’t enough, these banks will also levy a £1.50 charge on ATM cash withdrawals.
Charges are even higher if you use a TSB debit card abroad. While the foreign exchange fee is the same at 2.99%, the spending charge is £1, and the ATM charge is between £2 and £4.50.
Lower foreign exchange fees and ATM charges (at 2.25% and £1.50 respectively) than Bank of Scotland, Lloyds, Halifax, and Intelligent Finance, but the £1.50 spending fee is going to hurt you.
No foreign exchange fees! Unfortunately, it’s going to cost 2.75% every time you spend (with a minimum of £1.50), and 3.75% to withdraw cash from an ATM (with a minimum of £1.50).
What does all this mean in simple terms? At the worst, you could spend £5 for a beer in the United States, and it will cost you more than £6.50 when fees and charges are added.
The Good, Bad, and Ugly of Travel Credit Cards
Even though you could reduce the charges you incur on your holiday spending, it’s not all a bed of roses. As with almost all things financial, there are always two sides to the coin. Here’s my rundown of the good, the bad, and the ugly of travel credit cards.
The overriding reason to use a travel credit card abroad is the lower fees and charges. They are cheaper to use than standard credit cards, and this will help your money go further. The further your money goes, the better your holiday will be and the lower your interest and credit card bill when you return home.
On top of these savings, some travel credit cards give rewards like cashback or points to be redeemed as discounts from high street shops. Every little helps.
With competitive exchange rates, no or low foreign exchange fees, free cash withdrawals, and purchase protection under the Consumer Credit Act, it can make sense to use a travel credit card while abroad.
Moving on from what we really like about travel credit cards to what I’d call the bugbears. The bad stuff includes that not everyone will be accepted for a credit card account.
Eligibility depends upon your credit rating. The lower yours is, the harder you’ll find it to be accepted. Cards that are specifically for people with poor credit scores tend to offer lower credit balances and charge higher interest rates.
The best travel credit cards often charge a fee, either annually or monthly. You’ll need to work out if the amount of savings you’ll make will be worth this charge.
In fairness, the ugly side of travel credit cards is the same as it is for standard credit cards:
- If you fail to pay off your balance in full each month, you will be charged interest. This can be high. Far higher than, say, the interest on a personal loan.
- While some travel credit cards may allow you to withdraw cash with charges and interest free, most will levy interest from the day you withdraw your money from an ATM. This could get very expensive if you prefer to spend in cash while away.
Tips for Using a Travel Credit Card
You’ll save the most money when you use a travel credit card wisely. Here are my tips to do so:
1. Always Pay in the Local Currency
When you use a card abroad, you will probably be asked if you want to be charged in the local currency or in pounds. Always choose local currency. If you pay in pounds, you’ll receive a bad exchange rate. By choosing local currency, you’ll pay at your bank’s exchange rate.
2. Limit Your Cash Withdrawals
Even if your card doesn’t charge you to withdraw cash, the ATM might. Even if it doesn’t, most credit cards will charge interest on your cash withdrawals from the moment you take your money out of the hole in the wall.
Therefore, spending on your card is almost always better than withdrawing cash to use. This is also true for debit cards, where you’ll often still pay a transaction fee, even though there will be no interest to pay (unless you overdraw, of course).
3. Clear Your Balance Every Month
To take full advantage of the benefits of spending on a credit card – no fees and worthwhile rewards – you must clear your balance to zero every month. This will also help to bump up your credit score, which is key to getting the best credit offers and lowest interest rates.
7 Steps to Getting the Best Travel Credit Card for You
Rushing to apply for a travel credit card is not the best idea. You should give some thought to which you need. Indeed, even if you need one at all. Ticking all the boxes in the following process should make sure that you get the best card for you:
Step #1: Check Your Credit Score
This is easy to do using a service like Clearscore.com. This will give you a good insight into anything that might affect your application negatively, and the opportunity to correct them.
Step #2: Know Your Existing Cards
How do your existing cards measure up? Will they charge foreign exchange or cash withdrawal fees? Will they charge transaction fees every time you use your card abroad? How much will they allow you to withdraw/spend before charging you? If you make a cash withdrawal, will you be charged interest immediately?
Understanding the charging structure of your existing cards will help you compare them with travel credit cards later in the process.
Step #3: Understand How You Will Be Spending Money Abroad
Now, think about how you are likely to spend money while away. I tend to use a card for most of my spending, though I also like to have a little bit of cash in my pocket. Only carrying a small amount of money in my pocket is safer, too. Plus, I really don’t want to be hunting for an ATM when I could be enjoying myself.
Step #4: Can Your Repay the Balance Every Month?
The best way to spend on holiday is to only spend what you can afford. Sometimes that isn’t possible, though. If you won’t be able to repay your card balance in full each month, then you should look for a card that allows you to spread the cost interest free over a few months.
Step #5: What Type of Card Do You Need?
Now you know how you are likely to spend and how much it will cost to do so on your current cards, you can make a comparison with the cards that best match your spending style.
Step #6: Don’t’ Forget to Consider Monthly and Annual Fees
The penultimate step is to consider if your preferred travel credit card levies a monthly or annual fee. If it does, you’ll need to consider if this fee eliminates the benefit of owning the card.
Step #7: Apply
The final step is to apply for your credit card well ahead of time. The last card I applied for was delivered within 48 hours, but I’ve also waited for more than a week.
What If a Travel Credit Card Isn’t Right for You? The Best Alternatives
Credit cards aren’t for everyone; for example, if you already have enough debt (your credit score will help you decide this), or think that a credit card will encourage you to overspend, or you can’t afford to pay off the balance each month.
Credit cards have their place in your financial armoury, but financial discipline is key to using them effectively. Without this, your balance is likely to increase, and this will cost you dearly in interest charges.
This is nothing to be ashamed of. In fact, recognising that a travel credit card may not be right for you is a great sign that you are developing financial astuteness. There are always alternatives.
Finance companies like Revolut and Monzo allow you the freedom to use your card like a debit card, but with some of the features of travel credit cards thrown in. Caxton is another card provider worth considering.
Revolut allows you to hold foreign currency, exchanging it from pounds to local currency at the ‘real’ exchange rate (the interbank rate). You can exchange up to £1,000 in any month without incurring foreign exchange fees. Over this, there is a charge of 0.5%. You can also withdraw up to £200 in cash in any single month with no charges, and at the interbank rate. However, withdraw more than this and the charge is 2%.
Monzo is more like a traditional bank account, though operated online. You can only hold a Sterling balance, but when you pay for goods and services while abroad you’ll receive the Mastercard rate. This is not quite as good as the interbank rate, but not far off. In the EEA, cash withdrawals are free. Elsewhere you can withdraw up to £200 in any month before incurring a 3% charge.
Caxton FX has a prepaid card that covers 15 different currencies. You won’t be charged foreign transaction fees or ATM fees.
Other card providers, like Chase Bank, Starling Bank, and Virgin Money offer various cards with low or no foreign transaction fees and no ATM withdrawal fees. Each has its own terms and conditions, which you’ll need to read before you decide which is best for you.
Curve – A Possible All-In-One Solution
Curve is a financial solution that is gaining in popularity. The idea is simple: link all your existing credit and debit cards under one umbrella card, and use only this card while abroad.
When you spend money abroad, you present your Curve card and choose which card or account you wish to use. You can even redirect a payment up to 120 days after you’ve made it! With Curve, you will benefit from:
- Fee-free spending – up to £1,000 every 30 days (2% thereafter)
- Free ATM withdrawals of up to £200 per month (2% thereafter)
- Currency exchange in the app at Interbank rates
For even more benefits (including worldwide travel insurance), you could sign up to one of its premium accounts, though they cost up to £14.99 per month.
Got a Complaint About Your Travel Credit Card?
Sometimes banks and credit card companies get things wrong. This doesn’t mean you have to suck it up and take it on the chin.
If you think you’ve been charged the wrong amount, or interest has been levied when it shouldn’t have been, there are things you can do. The first course of action is to contact the bank or card company.
I did this recently. To cut a long story short, I had taken my eye off the ball and neglected to examine my credit card statements each month. When I did look at one properly, I realised I had been charged interest over several months that I thought shouldn’t have been charged. So I complained. I stated my case, the representative agreed with me, and refunded all the interest I had been charged – almost £200. Then she put my balance onto a zero-interest rate for 12 months!
If you don’t get any joy from the provider, you can take your case to the financial ombudsman. An easy way to do this is to use a service like Resolver. It’s free and makes it simple to manage your complaint.
That’s it for now! There’s only one thing left for me to say:
Use the seven-step process to get the best card for you, and be careful with how you use it abroad. If you plan to use it while on holiday, I hope you have an incredible time and make many memories. If it’s a business trip, I wish you plenty of success.