Best banks, credit cards and foresign exchange for spending abroad

Many Britons may be hoping to put the last two years of lockdowns and travel restrictions behind them by heading abroad in 2022.

However, with the cost of living crisis escalating and inflation reaching a near 30-year high, many may also be looking to cut unnecessary costs where possible.

Finding the cheapest deals for flights and accommodation are the most obvious ways to do just that.

While many are used to doing this, the ‘boring’ parts of trips can often get left behind – such as ensuring you have a credit or debit card that doesn’t charge you through the nose when using it abroad.

Cash splash: It’s likely that travel will be back on the cards for millions this year – and they may have fallen out of the loop on how to spend their holiday cash without penalty 

Most debit and credit cards come with a non-sterling transaction fee and cash withdrawal fee for every time you use your card abroad.

This fee includes the currency conversion charge imposed by the card associations such as Visa, Mastercard and Amex and the administration fee imposed by the banks.

The median foreign transaction fee faced by debit card holders is 2.75 per cent according to Fairer Finance, while credit card holders can typically expect a charge of 2.95 per cent.  

For example, those with an HSBC debit card can expect to face a 2 per cent fee for withdrawals with a minimum charge of £1.75 and maximum charge of £5 for each transaction. They will also face a 2.75 per cent currency conversion fee on top.

Someone with HSBC’s Rewards Credit Card Mastercard will face a 2.99 per cent transaction fee every time they use their car abroad.

A typical debit card charges £11.88 when shoppers withdraw £250 in cash abroad, according to analysis by Moneyfacts, while some credit cards can charge £14.95.

Purchases can be costly too, for just a £50 spend a typical debit card can charge £1.38 and a credit card can charge £1.50, according to Moneyfacts. 

Withdrawing cash using a credit card should be avoided as it often begin charging you interest at its APR immediately meaning costs can quickly escalate.   

However, aside from cash withdrawals, credit cards also have their advantages.  

Most notably, they offer greater protection on purchases you make under section 75 of the Consumer Credit Act – even for foreign transactions.

This affords you protection when buying items between £100 and £30,000 and allows shoppers to make a claim against their credit card company to get their money back if a retailer or trader lets them down and refuses to honour the contract.

However, as you’ll likely need to a card that allows you to pay and withdraw freely without the threat of incurring high interest charges, a debit card may be most sensible.

You don’t have to worry about switching or compromising your current bank account. You can just set up a secondary account that you can use when travelling and transfer travel money into it when you go abroad.

With all this in mind, we take a look at some of best credit and debit cards for those considering holidaying abroad this year and might be a little out of the loop.

Best debit cards 

Starling Bank 

Starling Bank’s current account offers both fee-free debit card withdrawals, and card spending abroad.

It does limit cash withdrawals to six each day, with a daily limit of £300, however – so it’s worth bearing that in mind if you intend to exceed that amount on any given day.

There aren’t many other perks that come with the account, but Starling has won huge acclaim for its customer service and app.

The debit card that comes with the Starling account doesn’t charge for card spending or cash withdrawals, wherever it is in the world you journey to

It was voted the best current account provider at the British Bank Awards in 2019, 2020, and 2021 and earned the best customer score in the latest Which? Survey.

Its current account can be downloaded through a smartphone app and can now also be managed online, and pays 0.05 per cent interest on up to £85,000. 

It offers instant spending notifications, compartmentalises spending into categories and lets accountholders create dedicated ‘spaces’ for their savings.  

In terms of overdraft, the bank charges interest rates of 15 per cent, 25 per cent and 35 per cent for arranged overdrafts depending on a range of factors including after an assessment of your credit file.

Metro Bank Current Account  

Metro does not charge customers for debit card payments or cash withdrawals anywhere in Europe.

However, for those looking to travel further afield, this may not be the best option.

In countries outside of Europe, there will be a non-sterling transaction fee of 2.99 per cent on purchases made, as well as a non-sterling cash fee of £1.50 on top of a 2.99 per cent transaction fee for any cash withdrawals from ATMs.  

The Metro account offers arranged and unarranged overdrafts with a fairly high interest rate of 34 per cent APR.

But in any given month, Metro says it will never charge you more than the monthly cap of £60 for charges relating to an unarranged overdraft.

Virgin Money M Plus Account

The Virgin Money M Plus debit card provides customers with free withdrawals and card payments outside the UK.

Those switching to its Money M Plus Account will also benefit from a £100 Virgin Experience Day gift card, as well as interest of 2.02 per cent on current account balances up to £1,000.

In fact, switchers are currently benefiting from 5.02 per cent on balances up to £1,000 thanks to a 3 per cent bonus rate fixed for 12 months – a £50 return.

Plus as of 1 March Virgin Money current account customers will soon have access to a market linked savings rate of 1 per cent on balances up to £25,000.

Arranged and unarranged overdraft rates range between 19.9, 29.9 or 39.9 per cent based on credit score.

Those switching to the Virgin Money account will be paid 5.02% on balances up to £1,000 for the first year

The Nationwide FlexPlus account

Nationwide’s debit card for its FlexPlus current account offers fee-free spending and cash withdrawals abroad.

The FlexPlus account also includes worldwide family travel insurance, mobile phone insurance, and UK and European breakdown cover.

However, it does come with an  account fee of £13 per month.

To help stomach the cost, Nationwide is currently offering cash bribes of £100 to new customers who switch across. For current Nationwide members who wish to switch to this current account from another, the bribe rises to £125.

For anyone worried about dipping into their overdraft, the interest rate is 39.9 per cent per year.

Monzo current account

Monzo customers can use their debit card for free when abroad.

However, there is a 3 per cent fee if you withdraw more than £250 cash in 30 days in the UK and European Economic Area (EEA).

Outside of Europe, customers will be hit by the 3 per cent fee if they withdraw more than £200.

For a £5 monthly fee, Monzo customers can opt instead for the Monzo Plus account which will enable them to withdraw up to £400 for free, anywhere abroad, each month.

For those concerned about the interest they might be charged when dipping into their overdraft, Monzo offers rates of either 19, 29 or 39 per cent, determined by your credit score.

Chase current account

The app based bank, which was founded by JP Morgan, could be another great option for holiday makers this year. 

It is offers a fee-free debit card abroad so you won’t be charged any fees by Chase when using their card while travelling, including for cash withdrawals at ATMs.

Its current account also offers customers 1 per cent cashback on spending for the first 12 months, although there are some exceptions.

Another perk that comes with holding this account is its small change round-ups feature from which customers can earn 5 per cent interest.

It means account holders can automatically save as they spend by rounding up their debit card purchases to the nearest £1, and depositing the small change into a separate account where it will earn interest at 5 pre cent.

Best credit cards 

A specialist travel credit card won’t charge you extra for spending abroad

Halifax Clarity credit card 

This card has no extra charges for spending abroad, and does not charge for withdrawing cash anywhere in the world. 

There is also no annual fee – so there are zero extra costs as long as you pay off your balance in full every month.

While there is no fee, interest is charged immediately at the card’s standard rate of 19.9 per cent on cash withdrawals and spending abroad. You can minimise the cost by repaying in full as soon as possible or avoiding withdrawals altogether.

Depending on your credit score, applicants may be given a higher interest rate of 27.95 per cent when withdrawing cash. In either case, it’s crucial to pay this off to avoid being charged daily.

You will be charged £12 if you pay your balance late, have a payment returned or go over your limit. 

Barclaycard Rewards card

There is no annual charge and no fees when using the card abroad, and you’ll be able to withdraw cash from an ATM without any charges.

The card comes with 0.25 per cent cashback on your everyday spending. The cashback is paid directly into your account. This will be credited annually to your statement or on your request.

You can also get up to five months of Apple Music, Apple TV+, Apple News+ and Apple Arcade for free, with your new Barclaycard – although this continues as a paid subscription after trial.

Watch out for: Remember to pay it off any cash withdrawals right away or you’ll be stung with a 22.9 per cent APR. 

Late payments will incur a £12 charge, but it will not charge this fee more than four times in a year.

Zopa credit card

The Zopa credit card does not charge a foreign transaction fee when used abroad.

Zopa does however charge a fee of £3 per cash withdrawal from an ATM, regardless of whether the customer is in the UK or abroad.

It will also charge interest daily on cash withdrawals, so it’s vital to pay this off as soon as possible.

It also charges a missed payment fee of £12 if you don’t make your minimum monthly payment on time.

Those who fail to pay it off in full each month will be subject to a rate of 34.9 per cent.

Santander All in One credit card

On top of having no transaction fees on any purchase made abroad, this card also offers 0.5 per cent cashback on spending – although there is a £3 monthly fee associated with it. 

Customers should be aware that they will incur a 3 per cent charge when withdrawing money from an ATM.

Another benefit of this card is that it charges 0 per cent interest on balance transfers for 26 months from account opening, with no balance transfer fee and 0 per cent interest on purchases for 20 months from account opening.

A balance transfer credit card allows people to pay off debts by transferring everything they owe over into this card – up to the maximum credit limit.

At the end of the 0 per cent period, interest will be charged on any outstanding balances and new purchases at the standard rate of 17.9 per cent per annum.  

For those who make a a late payment they will incur a £12 charge whilst a £12 fee also applies for those going over their credit limit.

Santander’s All in One credit card is one option if you are willing to pay the £3 monthly fee.

The NatWest Credit card   

There is no annual fee and you won’t pay foreign transaction fees when you use this card abroad.

The card comes with a low APR of 12.9 per cent which could come in handy if you forget to pay it off.

However, your actual credit limit and APR may vary depending on our credit assessment of you. It may be that you are given a higher APR of 19.9 per cent.

For those who make a a late payment they will incur a £12 charge whilst a £12 fee also applies for those going over their credit limit. 

This post first appeared on Dailymail.co.uk