Best debit and credit cards for spending abroad

Paying for goods and services by debit or credit card is quick and convenient, and many people – especially those who don’t feel secure carrying a wallet full of foreign currency around – prefer to pay with plastic while on holiday.

However, your ‘flexible friend’ might turn out to be a fiend if you use it for foreign transactions. This is because many debit and credit cards apply hefty fees to payments and withdrawals made abroad – and if you’re a big spender, these could add a significant sum onto the cost of your holiday overall.

Best credit card to use abroad

When it comes to avoiding the other charges foreign credit card transactions incur, all you need to do is to choose a credit card that won’t charge you for making purchases overseas.

Find the best travel credit cards.

Overseas credit card charges to avoid

Here are some of the hidden charges which many credit card issuers tend to apply when you use your plastic abroad:

• A ‘foreign exchange commission’ or 'foreign loading fee' of up to 2.99% of the sum spent, each time the card is used;
• Interest charges from the moment cash is withdrawn on the card, often at rates of up to 30% APR – even if the card balance is paid off in full before the end of the month;
• A cash withdrawal fee of around 3% (or minimum £3) when you take money out of a ATM in addition to the foreign exchange and interest charges. Which? experts recommend you avoid this except in extreme circumstances, whether you are abroad or at home.

Best debit cards to use abroad

Before using your debit card abroad, check with your card provider what fees will apply to any transactions you make. You may find it’s cheaper to take out a large sum from a cashpoint at the start of your holiday than to use your debit card for repeated withdrawals and over-the-counter transactions.

Overseas debit card charges to avoid

Using the wrong debit card on holiday could be just as costly as spending on some credit cards. Here are some of the hidden charges to look out for when issuers using a debit card abroad:

• Whether you withdraw money or spend it over the counter, you’ll be charged a 'foreign exchange fee' of around 2.75% – 2.99% – just as you would be for spending on a credit card;
• If you take money out at a cashpoint, a cash withdrawal charge of around 2% (or minimum £3) is likely to apply;
• Some debit card providers – such as Halifax, RBS, NatWest, Santander and Lloyds TSB – also add an extra ‘penalty fee’ every time you use your card abroad for purchases. This means making a succession of transactions in shops or at cashpoints, even for tiny amounts, could end up costing you a small fortune.

Use a credit or debit card overseas to get extra protection

There are certain situations where paying with plastic makes more sense than using cash – particularly if you have the best credit or debit card for spending abroad.

Using your credit card when you make big purchases – such as booking flights, activities or paying for your hotel – will mean you get extra protection should something go wrong. This is because purchases costing over £100 and up to £30,000 are covered under Section 75 of the Consumer Credit Act, which gives you the right to claim your money back from your card provider should you need to.

Debit card transactions are covered by the Chargeback scheme, which – although not enshrined in law – works in a similar way.

Two top tips for using credit and debit cards abroad

Finally, it’s probably a good idea to tell your debit or credit card provider you’re planning to use your card on holiday before jetting off. Providers sometimes block cards if ‘unusual transactions’ – such as overseas spending – are taking place. While this is a measure designed to guard against fraud, it can lead to inconvenience when holidaymakers try to spend on their cards legitimately.

Also, note that it’s increasingly common for overseas retailers to ask whether you’d prefer to pay in the local currency or sterling when you are settling a bill by credit or debit card.

Unless you can be sure the exchange rate you’d get for paying in pounds sterling is competitive, it’s best to steer clear of this option and pay in the local currency of whichever country you’re visiting.