Using cards to pay for goods abroad
Options of taking plastic
When taking funds abroad you will prefer to use the security and convenience of a card rather than taking cash or cheques by taking credit cards, debit cards, prepaid sterling cards or foreign currency cards. In fact with the right card you can be saving more than exchanging cash to cash and your funds are protected if they are lost or stolen.Credit cards
Ideally, if you are taking you credit card aborad you are looking for travel designed card like frequent traveller to collect air miles
or reward points which offer great bonuses but at a very high interest. Alternatively look for a credit card that offers you 0% interest on purchases.
One of the benefits of using credit cards abroad is that your purchases are covered in case there is a fault and you need to return items, which can give you peace of mind. Also some providers won't charge foreign exchange purchase fees however most do and the rule is 2.75% so check the fees table of your card provider. Finally be wary of the high charges for using cash machines with charges in the region of 2% of the amount withdrawn.
In some countries tourist will be request pre payment or a card imprint for bookings, so make sure you take a credit card with you.
Debit cards
Using debit cards abroad is a cheaper alternative. You still incur charges for cash withdrawals but the foreign exchange charge on purchases occur on every transaction you make (between £1 to £1.50) which can add up to a very large bill at the end of your trip.
Prepaid debit cards
This type of cards work in the same way as a gift card: you load your funds onto it and use them until it has run out, so you won't incur in any penalties or overdrawn fees and there are no interest charges. As with any card it can be easily replaced, usually within 24 hours.Prepaid cards are ideally for travelling abroad and have low foreign exchange fees (tipically 0%) so they are the perfect replacement for travellers cheques and currency.
Applying for a card is easy and you don't need to pass a credit check or have a credit history or even have a bank account.
Something to look for are cancellation or account termination fees and card renewals and replacement which can have a high fee usually from £5.00 ATM withdrwals are lower than credit cards and in some cases free when paying a monthly account management fee.
Alternatively to prepaid debit cards are foreign currency debit cards which perform similary but allows you to load you card with euros or US dollars and if you card is lost or stolen and funds taken out you get your money back. Exchange rates are far more competitive than travel cash which make them the best choice to take funds abroad.
Compare
Credit card |
Debit card |
Prepaid debit & fx cards |
| Credit checks on application, which will decide credit limit and interest rate |
Credit check to open account which the card will be linked | No credit checks, limit is ususally £2,500 to £3,000 |
| Line of credit can be increased over time |
Account can have an overdraft facility | No line of credit so no borrowing if funds on card have run out. |
| Interest charges on money borrowed against the credit limit if there is an outstanding balance after the interest free period |
Interest earned on savings. Interest charges on overdrafts without an interest-free period | No interest charges |
| Charges on late payment, over-limit, cash advance, foreign exchange purchases, copy of statements, non-activity fees, ATM withdrawals | Fees apply if an agreed overdraft are exceed |
Purchase fee and termination account fees may apply, ATM withdrawals |
