Top tips for carefree holiday finances

Most of us well aware by now that we're likely to be stung with charges for using our debit or credit cards abroad, yet continue to use the same cards just to save the hassle of finding a new one.

Here we round up the best value cards for overseas use so there's no need to face charges again.

Stats from Defaqto show we're hit with an average fee of around £3 for using a credit or card for purchases aboard, and stung with charges of between around £4 and £5.60 for withdrawing £100 from an overseas ATM – and that's before any interest is charged.

David Black, Defaqto's insight analyst for banking, said: "For most of us, when on holiday our tendency will be to spend a bit more and live life to the full. However, it is important for people to think about how they will manage their money while abroad to avoid a nasty additional financial shock when they return home.

"Cards can be an effective way to spend overseas, but each type of card has its costs and benefits which people need to consider."

So when it is possible to completely avoid these charges, it makes sense to spend wisely and choose a better value card. Here's how:

How to cut the cost of spending abroad
  • Beware dynamic currency conversion. When paying for something abroad, you may be offered the option to pay in sterling – avoid this and always opt to pay in the local currency, as the exchange rate is unlikely to be competitive as that charged by your card provider.
  • Make use of the protection provided by the Consumer Credit Act 1974. If you're spending over £100 it makes sense to use a credit card as you'll be covered by the act if the goods or services turn out to be faulty.
  • Avoid a red flag fraud warning on your account, which could block transactions, by informing your card provider where and when they are going before you leave the country.
  • For extra safety and a useful budgeting tool, consider a prepaid card which you load up with currency as you need it. The Euro or Dollar denominated cards offered by FairFx and CaxtonFx have the lowest overseas usage charges.

Credit cards with no foreign exchange fee on overseas purchases:
  • Halifax Clarity Credit Card
  • Metro Bank Credit Card
  • Nationwide Building Society Gold Card (fee-free until 31st July 2011)
  • Post Office Credit Card
  • Saga Platinum Credit Card (only available to those aged 50+)
  • Sainsbury's Gold Credit Card (package card at £5 a month)
  • Santander Zero Credit Card (only available to Santander current account customers)

Credit cards with no fee on overseas cash withdrawals or purchases:
  • Halifax Clarity Credit Card (typical 12.9% APR charged on cash advances from the date debited to the cardholder's account)
  • Metro Bank Personal Credit Card (typical 13% APR charged on cash advances from the date of withdrawal)
  • Sainsbury's Gold Credit Card (interest free credit on purchases and cash advances if the cardholder repays the entire balance on time every month. Package card at £5 a month)
  • Santander Zero Credit Card (typical 27.9% APR charged on cash advances from the date debited to the account - the card is only available to Santander current account customers)
Current accounts with debit cards that do not charge a fee for overseas purchases or
cash withdrawals:
  • Cumberland Building Society Current Account (only available to people living in Cumbria, North Lancashire, South West Scotland or West Northumberland)
  • Metro Bank Personal Current Account
  • Norwich and Peterborough Gold Current Account
  • Santander Zero Current Account (only available to qualifying Santander mortgage, savings or investment customers)
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