Travel Credit Cards
compare product table here – todo
Organising an overseas trip comes involves several considerations, from accommodation, transport, to figuring out how much stuff you’re going to cram into your suitcase on the way home. Another major consideration is how you’re going to spend your money overseas.
For would-be travellers, it can pay to know that you can use your credit card in most countries around the globe for your daily spending, whether it’s buying souvenirs or unusual street food. Some cards fair much better overseas than others, and while using these cards might be convenient, there are potential costs that can shock you come your next bill.
Why use a credit card overseas?
Credit cards offer convenient access to a line of credit no matter where you are in the world; you can easily use them to purchase goods or experiences and not have to pay the costs off till later. If your holiday lasts a couple of weeks, then this can put you at ease knowing you won’t have to deal with the costs until you get home. Using a credit card also means you don’t have to carry around wads of cash, which (on top of being a hassle) is easier to lose.
On top of their convenience, travel credit cards also offer:
- Worldwide acceptance
- Rewards programs
- Special features and perks
1. Worldwide acceptance
Since the majority of credit cards are issued by Visa and Mastercard, you’ll have little trouble finding places that will accept your card – there are millions of them all over the globe. Cards issued by American Express and Diners Club might be less accepted due to the higher fees they attract, but there’s still no shortage of places where you can use these cards.
2. Rewards programs
If you have a frequent flyer or rewards card, you may still be able to earn points for overseas spending, with some cards actually offering bonus points for non-Australian dollar spend. Also, if you’ve already built up enough points, you could use them to pay for business class flights.
Keep in mind that some credit cards offer big bonus rewards points offers for simply signing up – we’ve written a detailed article on the matter here.
3. Special perks
Depending on the card you’ve got, it might have some nifty features that can make your trip much easier and even a little classier, like access to airport lounges, complimentary travel insurance, concierge services, fraud protection and more. Just remember that your card is probably attracting higher than average fees if it has these features (although this isn’t always the case).
You can read more about the perks of credit cards here.
Why you shouldn’t use a credit card overseas
Credit cards aren’t a perfect product by any means, and there are reasons why you might want to reconsider using them.
The first is the temptation to overspend. Credit cards are a quick and easy way to spend money – sometimes too quick and easy. When you have your card on you at all times, there can be a temptation to overspend.
The average credit card debt per person according to the Reserve Bank of Australia is over $2,000 (August 2018), and when you factor in flights, accommodation, travel and the cost of buying food and drink every day, even a short overseas trip can easily cost more than this. Putting all of this onto your credit card can lead to significant interest charges if you don’t fully pay off the balance when you get home.
Another reason why you might want to reconsider using a credit card is the fees you can be charged. It can be very costly to withdraw money from an ATM in another country with your credit card. There’s usually a cash advance fee of about 2-4% of the transaction, plus the fact that cash advances are usually charged interest straight away.
Don’t forget about currency conversion fees
What can really hit people hard is the currency conversion fee on foreign purchases and cash advances. Because your credit card is Australian, the provider will have to convert this currency from Australian dollars when you make a purchase, which can attract a fee of between 2-4%. So if you spend $2,000 on your credit card with a currency conversion fee of 2%, you’d be charged an additional $40.
Cards that are designed for travellers are more likely to come with 0% currency conversion fees. You can read more about the international fees charged on credit cards here.
What are the travel alternatives to credit cards?
You don’t have to use a credit card overseas, although they are the preferred method for some. There are multiple different options you can use:
- Debit cards
- Travel money cards
Your everyday banking debit card is a useful alternative to the credit card; rather than borrowing money from the provider, you’re spending your own money from your savings or transaction account. If you don’t have the money in there, you can’t spend anything – this can make it a lot easier to budget and limit the spending you do.
Most debit cards also come with currency conversion and ATM fees, but like credit cards, there are some that don’t. Unlike credit cards, debit cards don’t charge interest on ATM withdrawals (cash advances for credit cards), making them a more suitable option for cash withdrawals.
However, debit cards don’t typically come with the attractive features or rewards programs offered by many credit cards.
Travel money cards
Travel money cards let you load different currencies onto a card so you can spend or withdraw cash in the currency of the country you’re travelling in. By loading a card up with the currency you intend to do most of your spending in before the trip, you can lock in an exchange rate early to avoid potential dips in the Aussie dollar (this can also be a bad thing if the Aussie dollar improves after you’ve loaded the card).
Also, with a travel money card, you limit your spending to the cash that’s on there, just like a debit card.
These cards have several disadvantages to the others though:
- They tend to have worse exchange rates (when loading or unloading the cards)
- They usually have more fees for things like loading, using and replacing the card
- They can take days to reload if you run out
You don’t have to take out just one of these cards. It’s entirely possible that you can use a combination of the three to make the most of your holiday. For example, you could have a debit card for making ATM withdrawals, your credit card for perks such as airport lounge access or complimentary travel insurance, and a travel money card with some pre-loaded foreign currency in case the value of the Aussie dollar takes a plunge.
Whatever you decide to go with, just make sure you’re content with the fees charged and the convenience, safety and features of the card. The best way to find all this out is to read your would-be-card’s terms and conditions before you leave the country.