Understanding Credit Cards for use abroad
Why choose a credit card to go on holiday?
The right credit card can sometimes provide you with the cheapest way to spend your money abroad. With many credit cards adding 3% to the foreign exchange rate you need to make sure you pick the best one before you go on holiday. Credit cards that are designed for spending abroad do not have this charge, allowing you to get the best exchange rate beating even the most competitive bureau.
Some cards also offer 0% commission on purchases abroad, so you can buy all the souvenirs you want without ending up with a pocket full of foreign change at the end of the holiday. But it is always important to ask yourself if you can pay the balance off in full once you are back home as some cards interest rates may make the 0% commission a bit redundant if you cannot pay it all off.
If you don’t want to credit card abroad, or are worried about spending over your holiday budget, we also display a range of prepaid cards that are designed to take on holiday
Glossary of key Credit Card terms
Foreign Usage Fee
If you use your card abroad (or to buy in a foreign currency over the internet), most providers will charge a currency conversion fee. This is on top of the normal interest attracted by your credit purchases.
Cash Advances
You obtain a cash advance by using your card to draw cash. Cash advances will invariably attract interest from the moment they are made, so there is no 'interest free' grace period.
Cash Advance Fee
You will also be charged for using your card to draw cash. The charge might be made as a flat-rate fee on each withdrawal or taken as a percentage of the amount of cash advanced.
Cash Advance Rate
This is the rate of interest attracted by your cash advance. Interest is invariably attracted from the moment it is made and the rate of interest for this facility could be higher than the card provider’s standard rate on regular purchases.
Credit Limit
The maximum amount that the provider will allow as credit i.e. a limit that cannot be exceeded as the balance owing on your credit card.
Minimum Payment
This is the minimum amount you must pay in any one month in order to meet your credit repayment agreement with the company. The amount of the minimum payment is usually calculated as 2% or 3% of the outstanding debit balance.
Representative APR
APR stands for Annual Percentage Rate and is the effective rate of interest, over the year, which reflects all the costs of the credit, including interest charges and other fees (such as an initial arrangement fee and any annual charge). It is 'representative' as 51% of those accepted for the card have to be offered the advertised APR.
Representative Example
New regulations that came into force on the 1st February 2011 now mean that every credit account advertisement has to include a representative example of the total cost of the credit. The example includes all the required 'standard information', such as the representative APR, an example credit limit and the rate of interest on purchases after any introductory period has expired.
Withdrawal Limit
This relates to cash advances and is the maximum you can withdraw, either at a cash machine or over the counter at a bank, in any single day.