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Best Travel Credit Cards

Fiona Leake
Fiona Leake
  | Edited by Fiona Leake
Updated 19th January 2021

Are you a regular holidaymaker? Or do you often shop on foreign websites? Then a travel credit card could save you money on fees and exchange rates. Read our guide for more information on the best travel credit cards and some frequently asked questions (FAQs).

What are travel credit cards?

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Travel credit cards are designed to make it cheaper to use your card abroad and may even give you travel-related rewards. Travel credit cards give the security of using your card abroad as you’ll avoid carrying around a lot of cash. These cards also minimise the fees that come with credit card use in foreign countries.

When using your travel credit card at home, it will operate just like a normal credit card.

How do travel credit cards work?

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When you make a purchase abroad, you are charged a non-sterling foreign transaction fee. Foreign transaction fees on most credit cards are 2-3%. Travel credit cards don’t charge this transaction fee, meaning you’ll spend much less when making purchases abroad. 

If you are charged 3% on every purchase you make abroad, this can start to add up. This is why frequent travellers can benefit from travel credit cards. 

Travel credit cards also won’t charge a transaction fee when you make purchases online in a foreign currency. 

Some travel credit cards also have no fees for cash withdrawals that are made abroad. Most credit cards do charge for cash withdrawals which can be anything from 2.5% to 3%. However, if you withdraw cash abroad, your travel card might waive the fee for you. 

Essentially, travel credit cards are standard cards that don’t charge transaction fees abroad. Travel credit cards are not to be confused with airmile rewards cards which can give you airmiles as rewards for spending on your card.

Where can I use a travel credit card?

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You can use a travel credit card in shops, restaurants, cash machines and online. These cards can be used in any country and for online shopping. You won’t have to worry about being charged a transaction fee on foreign purchases.

Which credit cards have free travel insurance?

Many credit cards do offer travel insurance. These cards usually charge an annual fee and so the travel insurance isn’t necessarily ‘free’. Check with your card issuer for the full details, you may need to sign-up for a programme in order to activate the travel insurance coverage. 

Getting a credit card with free travel insurance shouldn’t be a priority. Instead, look for the travel cards with no fees and low-interest to make maximum savings abroad.

How much does it cost to use a credit card abroad?

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You can face a range of charges if you were to use a standard credit card abroad. These fees may include:

  • Foreign transaction fees - every purchase you make abroad using a credit card will be hit with a non-sterling transaction fee. This is worked out as a percentage of what you spend, between 2-3%. For example, if you were to spend £300 on holiday, you could be paying up to £9 in added fees. 
  • Non-sterling cash fee - you will also be charged for any cash withdrawals you make when abroad. This is typically around 3%. 
  • Interest on cash withdrawals - if you make a cash withdrawal using a credit card, you’ll be charged interest straight away.

These costs tend to add up and make travelling even more expensive than it already is. This is where travel credit cards can save you money.

How much do travel credit cards cost?

The best travel credit cards don’t charge foreign transaction fees or non-sterling cash withdrawal fees. However, you will still be charged interest from day one on any cash withdrawals you make. 

However, some travel cards will charge a monthly or annual fee. If you don’t travel very often, this fee could outweigh any savings you’ll make abroad. However, if you are a frequent traveller, your savings could make it worth it. 

Some travel credit cards also can offer 0% interest on purchases for a set period of time. These bonus offers can help you to compare the best travel credit cards.

What are the benefits of a travel credit card?

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Travel credit cards can offer several benefits to help cut the cost of travelling overseas. Let’s take a look at some of the benefits of a travel card in comparison to a normal credit card.

  • No foreign transaction fees - you can use a travel credit card abroad without worrying about a 3% fee being added to your bill. This can save you a lot of money when travelling.
  • Rewards for spending - some travel credit cards will offer rewards such as cashback, travel discounts or vouchers when you spend money. This will allow you to save even more money when travelling.
  • Good exchange rates - exchange rates on travel credit cards are much more competitive than standard credit cards. This means that you’ll get more foreign currency in exchange for your local currency.
  • Protected purchases - you are protected by Section 75 of the Consumer Credit Act when you make purchases abroad between £100 and £30,000 using a travel credit card. This offers you more protection against faulty products than you would get when using a debit card or cash abroad.
  • Extra security - using a credit card abroad is safer than taking a large wad of cash with you on your travels. Cash is more likely to be stolen and thieves might target you if they see a large amount of cash being carried around.

Things to consider before getting a travel credit card

Before deciding whether to apply for a travel credit card, there are a few things to keep in mind.

  • Your credit score - travel credit cards often require a good or excellent credit score in order to be accepted. If you already have a credit card, your chances of getting accepted for a travel card might be lower. Multiple applications can be seen as a red flag to lenders.
  • Interest rates - travel cards do tend to have higher interest rates than standard credit cards. This means that if you don’t pay off your balance every month, the high-interest will be added and this can build up your debt quickly. 
  • Annual fees - some travel credit cards can come with an annual fee, especially the ones that might offer bonus travel rewards. You’ll have to decide whether the annual fee is worth the extras you get with it. 
  • Practicality - whilst travel credit cards can be used both at home and abroad, you might not want to use one for your everyday purchases. Many other credit cards offer much better deals for everyday spending, such as 0% purchase credit cards or rewards cards. Therefore, many people will only use their travel card abroad to save money. 
  • How often you travel - if you don’t go abroad at least once a year, a travel credit card might not be beneficial for you.

Do I need a travel credit card?

The main thing to consider when deciding whether a travel credit card is for you is if you can clear your balance at the end of every month. If you allow the high-interest rates to build up on what you owe, a travel credit card can end up being a very expensive commitment. 

If you are looking for a credit card to borrow money on and pay back over a longer period of time, then a 0% purchase card with no interest for the first few months will be a better option. 

You’ll also need to take stock of your credit score. Before applying for a travel credit card, request a copy of your statutory credit file for free from Experian, TransUnion or Equifax. You’ll need a good or excellent credit rating to be accepted for a travel card.

If you travel at least once a year and can pay back your balance every month, then a travel credit card can be worth it. You’ll avoid added fees when making purchases abroad and you’ll have Section 75 protection on your spending. You will also be able to shop online on foreign currency websites without transaction fees being added.

What are the alternatives to travel credit cards?

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If you still aren’t sure whether a travel credit card is right for you, there are a few other options to consider which we discuss below:

Prepaid travel cards

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Prepaid travel cards allow you to put cash on them before you go on holiday. You can then make purchases in the same way that you would with a debit card. Unlike a credit card, you are adding the money to the card and so won’t have to pay any interest. 

If you get low on funds using a prepaid travel card, you can simply top it back up again.

Prepaid card vs. travel credit cards

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Prepaid travel cards are the most popular alternative to travel credit cards but which one should you pick?

Prepaid cards are great for those who are travelling on a budget and only want to spend money that they’ve already loaded onto the card. If you have a poorer credit score, prepaid cards are a good option as credit checks aren’t usually carried out when you apply for one. 

However, travel credit cards might have better exchange rates and won’t charge a foreign transaction fee. Prepaid travel cards have many different fees including application fees, monthly fees, charges to load money, fees to withdraw cash and fees on spending.

Another thing to note is that some places won’t accept prepaid travel cards abroad such as car hire firms, hotels and even petrol stations. 

Prepaid travel cards could be a good option for younger travellers who have a budget and don’t want to carry cash around. However, for those who travel regularly, a travel credit card could end up cheaper as long as you can clear your balance monthly to avoid interest.

Debit cards

Some debit cards won’t charge fees on transactions or withdrawals abroad. However, you might need to open a new account in order to avoid these fees and that’s quite a commitment for a holiday! 

Credit cards tend to offer more protection on purchases too.

Airmiles credit cards

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If you are looking for cheaper travel then Airmiles credit cards can get you flights, cheaper hotels or vouchers. These credit cards will still charge foreign transaction fees but you can save money on holidays by using the rewards on offer. 

Some travel credit cards do offer rewards. This would be the better option as you can enjoy rewards and waive transaction fees abroad.

Travel credit cards golden rules

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Follow our golden rules to make the most out of your travel credit card and avoid any unwanted fees.

1. Pay in the local currency

When you pay by card abroad many hotels, cash machines and shops will ask you whether you want to pay in the local currency or pound sterling. Always choose the local currency whenever you are asked this question.

If you pay by pound sterling abroad, the retailer will do the currency conversion and this rate isn’t usually good at all!

2. Try to avoid withdrawing cash

Even if your travel credit card doesn’t charge a fee for withdrawing cash abroad, you still should avoid doing so. This is because you’ll be charged interest immediately after taking out cash, rather than after the end of the month. Any savings you made by avoiding fees will be wiped out by interest.

3. Don’t use a travel credit card to borrow money

Travel credit cards are a great way to save money when travelling abroad. However, these cards come with high-interest rates that can dwarf any savings you made by avoiding fees whilst travelling.

Make sure you set up a direct debit to pay off your balance in full every month to avoid added interest.

How to compare travel credit cards

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If you’ve decided that a travel credit card is for you, then your next step would be to compare different cards to find the best deal. Here are some things you should think about to compare the best travel credit cards:

  • Foreign transaction fees - the main benefit of a travel credit card is that you can avoid fees when spending abroad. Always confirm your chosen card waive this fee.
  • Annual fee - many travel credit cards don’t have an annual fee. If you only use your travel credit card once a year but are paying an annual fee for it, this might be costly. Try to pick one that doesn’t charge an annual fee.
  • APR - try to pick a travel card that has the lowest APR rate, so if for some reason you are unable to clear your balance, you won’t be paying too much interest on top. 
  • Perks - if you’ve found a travel credit card that has no foreign transaction fees, no annual fees and has a low APR, then you can narrow down your search by comparing perks. Some travel cards might offer cashback, rewards or a 0% interest period.
  • Required credit score - whilst most travel require a good credit rating, you can still find cards with no transaction fees that might accept lower scores.

FAQs

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