What are the advantages and disadvantages of overseas spending cards?

What are the advantages and disadvantages of overseas spending cards?
Written by Mark Grimley
Published on 6th July 2017
Updated on 23rd August 2018
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Choosing the right credit card

Whether you’re heading off on holiday or on a business trip, credit cards are convenient, widely accepted and can be handy in an emergency. But an everyday credit card is not always your best option as most charge fees for transactions made abroad, which can all add up, particularly if you’re a regular traveller. The answer could be overseas spending card ,either a credit card or a prepaid currency card , and both have advantages and disadvantages, so let Choose Wisely talk you through the pros and cons so you can pick the best option for your next trip.

Overseas credit cards

The advantages:

  • They can be charge-free or much lower than average

Using a standard credit card abroad can addhidden charges that can quickly mount up. These include cash withdrawal fees, interest charges, even if you pay off in full, and non-sterling transaction fees of around 3%. Even withdrawing cash from an ATM can add an extra 3% to the amount you’ll pay back. An overseas spending credit card that does not have these charges or at least lower than average charges, can save you a significant amount of money, particularly if you are a regular traveller. Unlike most standard credit cards , overseas spending credit cards generally won’t charge you for cash withdrawals at ATMs which can save you money, even on a single trip.

  • There can be useful travel rewards

These include better rates on your travel money, discounts on travel insurance and reward points for flights. When matched against fee savings these can make them a great choice for someone who travels a great deal.

  • Payment protection

An overseas spending credit card offers protection, meaning that any purchases costing between £100 and £30,000 that are paid for with the credit card, will be liable to the credit card company should anything go wrong. This can be especially useful on items purchased overseas that you cannot take back.

The disadvantages:

  • Interest rates

Although they can seem like the best way to spend when you’re abroad, an overseas spending credit card can be a nightmare if you do not pay them off in full each month. Interest rates can be high and so we recommend setting up a monthly direct debit to make sure that interest repayments don’t cancel out any savings made.

  • Not all cards are equal

Whilst most banks will charge you for spending abroad by adding a non-sterling exchange fee of up to 3%, overseas spending credit cards will usually waive this fee. Instead, you’ll get a Mastercard, Visa or Amex wholesale rate and of these three, Mastercard’s rates are usually the best. If you travel a lot and plan to use the card for quite a few overseas transactions then it could pay to opt for a Mastercard.

Pre-paid currency cards

If you don’t want to take a credit card overseas, then a prepaid currency card may be a better option. This works like a prepaid gift card, in that you basically add currency before you travel and spend or withdraw cash as you wish.

The advantages:

  • They are safe

They are much safer than carrying cash and, like a credit card, if you lose it your issuer will cancel it and send a replacement.

  • They are easily accessible

Almost anyone can get a prepaid currency card, so they are great if you’re credit rating is poor or you need to arrange one in a hurry.

The disadvantages:

  • There can be hidden costs

These cards may look like a safe option but they are not always free, so make sure you understand the charges before you apply for one. Some of them charge an application fee of up to £9.99 and can also charge you ATM withdrawal fees, top-up charges and fees for any replacement cards. All of this can add up and cancel out any savings you make elsewhere, so do your sums to make sure that you’re getting the best deal for your circumstances.

Mark Grimley
Written by
Mark Grimley
Head of Partnerships & Take Control Author at Choose Wisely

Mark joined Choose Wisely in 2015. He continues to work in close contact with the providers, brokers and journalists operating in the world of consumer credit.