Credit Card Articles

When I travel abroad – and much of my travel has been funded by credit cards over the years – I only use credit cards for emergencies. I am lucky to have a Nationwide debit card that does not charge at all for transactions overseas and lets you draw your cash interest free too! I am well aware that the cost of my trip will drastically escalate if I use any of my credit cards for purchases or cash.

This is because credit card companies typically charge what is called a loading fee to each and every one of your overseas transactions. What’s more they often don’t even record this fee on your statement – so you can be blissfully unaware of this imposition for quite some time. Each 100 you spend will carry a charge of 2.75 on a typical fee of 2.75%. Is it worth it?

The most important thing is to avoid drawing cash on your credit card – of course this is just plain common sense even when you are in your own country, due to the 2-2.5% fee they slap on top of each withdrawal. But when you are abroad it is even worse as there is not even an interest free period so you will find nasty interest charges levied on your withdrawal too! Truly nasty as these are they’re likely to be higher even than your current highest rate – 27.9% in some cases. Talk about daylight robbery!

And it gets worse still. Have you ever heard of “hierarchy of payments”? No? Well you are not alone. This is something that is only in the very tiniest print somewhere, God knows exactly where, on your statement. In many cases the bank will place the payment of cash withdrawals last of all – this means that you will be stuck with this ridiculous inflated interest for the life of the balance. Could anything be worse short of severe illness or death itself?

Another thing to look out for when using your credit card abroad is to remember to pay in the local currency to avoid retailers applying the conversion rate to your purchases, often in the region of 3%. Do not be misled by the apparent favour shown to you in allowing you to see the amount you have spent in stirling. You will just end up by paying more, so beware!

So it makes sense to opt for a credit card that doesn’t carry all the disadvantages mentioned above. If you can, find a debit card like mine that allows you to use it abroad interest free. Of course, make sure you have enough funds to cover your expenses. If you don’t have enough in the bank and you’re relying on credit to fund your trip, consider an authorised overdraft facility. It will certainly work out a whole lot cheaper than an expensive credit card!

However if you do decide to use your credit card abroad always let the issuing bank know in case they decide to block it against unauthorised use abroad. This could apply to your debit card too but I always use my debit card abroad and have never had any problems. As always, better safe than sorry – but sometimes it is possible to be over cautious!

It is also an option to obtain a credit card that is geared to use abroad. Make sure that there is no loading fee on it and has low APR for cash and purchases. By now you will have realised that the APR is not the only criteria to watch out for when electing to use a credit card for that overseas trip. You may also need to consider the benefits of cards that are tailor made for frequent travellers as these have air mile and cheaper travel insurance offers attached to them. Indeed there is a whole range of air mile credit cards to choose from. For example Virgin Money offers one air mile for every pounds worth of purchases and if you are willing to pay an annual fee this is then doubled. But really this is only worth considering if you are a very frequent traveller and also like to live the good life! If you also book your trip from Virgin Holidays or Virgin Atlantic you profit even more with double flying club miles- this means 4 miles for every pound you spend. Hmm may be worth considering …There are indeed a whole host of additional benefits from using a Virgin card – travel accident insurance up to 250,000 and in the possible event of a delayed or cancelled flight a useful 750! It really is a very good deal especially if you need to transfer balances to your Virgin card as they are also offering an introductory rate of 0% for those!

Personally I’d choose my debit card any time, backed up by a sensible credit card such as Virgin for the odd major purchase or unexpected contingency. But it is good to be aware of all the options so that you can make an informed choice!

Madusha Writes freelance articles.

He owns and manages http://six-bucks.net/reviews/