Using Credit Cards While On Holiday

Posted by Allison on 4 April 2009, 10:10

Although we all still queue up at the Bureau de Change to change our own cash into the currency of the country we will be visiting this year on our annual break, it's still necessary to make sure we have other means of paying for goods and services while we are away.

While foreign currency is quick and easy to use, there is always the risk that it will become lost or stolen while we are on holiday, and if that happens there is no way to replace it.  That's why you should make sure you take a credit card on holiday with you – it is virtually a necessity now.

However, just because a credit card does offer an easy way to pay if you run out of cash or you want to buy something more expensive, it doesn't mean that it comes with no catches at all.  In fact, you should do your homework before you leave home to make sure you know which card to take with you and how much it will cost you as a result.

While there is no doubting that a credit card is a great asset for anyone going abroad, it comes with its fair share of pitfalls too.  The trick is to know what those pitfalls are, to make sure you don't fall victim to any nasty surprises when you get your credit card bill through on your return home.

The problem is that there are often huge charges levied on you for the privilege of using your credit card when you visit a foreign country.  What's more, some cards will result in you being charged twice – you'll get a flat fee for using it in the first place, followed by a percentage of the actual amount you spend.  When you add those two together it's not surprising that Britons are charged millions of pounds every year in fees on transactions that take place in other countries all around the world.

But there is another trap you need to watch out for as well.  A lot of outlets give you the opportunity to pay in your own currency now instead of in theirs – but despite the charges you'll get on your credit card, it would be cheaper to stick with the foreign currency since you'll avoid exchange rate charges foisted on you by the shop you're in, which in themselves can be huge.

So what can you do to avoid the worst of it?

The first step is to take out all the credit cards you have at the moment and do some research on them.  There are plenty of online sites which allow you to compare your credit cards to see which deal is the best one for you, and there is no reason why you can't use these sites to see what your current card offers you.  Just make sure the deal hasn't changed since you got your card.

Make a note of what each card charges you for the privilege of using it abroad and put it to one side.  Next, do a search for those credit cards which don't charge you for foreign transactions, regardless of what currency they are in.  If you can't find any, make a note of the ones which charge the lowest amount. 

If you don't already have a card which doesn't charge you at all (or which has the lowest fee of the lot) you should apply for the card which meets these requirements.  If you do it in plenty of time for your holiday you can take this card with you when you go and not have to worry about racking up extra fees as a result.

When you get home and your credit card statement comes through, the amount in foreign currency that you have spent will be broken down as it would for any other statement.  You should then see the conversion rate next to each amount – the rate that applied at the time you made the transaction.  The total amount in pounds sterling will then be indicated in the end column.

Just as you would with every statement, make sure you check all the transactions which took place while you were away to make sure nothing untoward went on.  If you have made sure your credit card never left your sight while you were paying for anything then you will have been at a much lower risk of falling victim to fraud of any kind.

All this sounds quite frightening but in truth it needn't be.  So long as you educate yourself before you go and take the right cards for the situation, you shouldn't spend any more than you intend to each time you need to use your credit card to pay.

But what about debit cards?  Do they pose the same problems?

In general they don't incur the same level of charges as credit cards do, but it's still wise to find out if any charges apply to your own cards before leaving home.  If you want to withdraw foreign currency on holiday then it's certainly a lot cheaper to do so straight from your own bank account with a debit card than it is to use a credit card to make the withdrawal.

It might seem like a minefield where making the wrong move results in losing a lot of money, but in reality knowledge is your ally.  Check out your cards and take the right ones with you, and make sure there aren't any rules which apply to different countries at the same time.  Normally you'll find there is a flat charge which applies everywhere but it pays to be safe.

It also pays to keep the emergency numbers for all your cards on a separate piece of paper which is separate from your cards and your wallet or purse.  That way, if the worst happens you'll at least be able to phone and get the cards cancelled straight away.