How to make holiday cash go further

What with meals, souvenirs and drinks, the cost of a holiday abroad can quickly add up. But don't let your holiday money shrink further than it should simply because you are using the wrong piece of plastic. Ruth Jackson explains how to avoid paying through the nose for your money while on holiday.

By Ruth Jackson-Kirby

published 3 September 2010

in Features

What with meals, souvenirs and drinks, the cost of a holiday abroad can quickly add up. But don't let your holiday money shrink further than it should simply because you are paying with the wrong piece of plastic. Although most credit cards hit you with extra fees and charges when you use them abroad, there are a select few that won't charge you a penny.

In the past the Nationwide Gold credit card was the pick of the bunch for regular travellers. It didn't levy any extra charges when used abroad. Sadly, that has changed. Nationwide now passes on a 1% exchange fee when the card is used to make a transaction in any currency other than sterling. Fortunately there's an alternative.

Halifax has launched a new credit card that has stormed to the top of the best-buy tables. The Halifax Clarity credit card doesn't levy any foreign-exchange fees anywhere in the world. What's more, the interest rate is a competitive 12.9% on purchases. You can also take cash out from foreign ATMs without paying any withdrawal fees. Just be aware, however, that if you withdraw money on any credit card you will be charged interest from the minute the cash leaves the ATM. So you'll pay this interest even if you clear your balance in full each month. On the upside, the Halifax card charges 12.9% on cash withdrawals that's much lower than most credit cards. If you have a Halifax Reward current account you'll also receive £5 every month that you spend over £300 on the Clarity credit card.

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Another reasonable option is the Santander Zero card. It doesn't charge a foreign-exchange fee or a cash advance fee when you are abroad. It has a higher interest rate at 18.9%. It is also only available to people who have a Santander current account, mortgage or investment. Finally, there is the Post Office Platinum card. This comes with a 16.9% APR and doesn't charge you anything to use it abroad. But you'll be charged a fee if you withdraw cash from an ATM. You can avoid that if you use the card to buy your currency in a Post Office before you go you won't be charged commission.

Once you're abroad and waving your fee-free credit card at the cashier, don't fall at the final hurdle. More and more frequently people are being asked if they want to pay for their goods in pounds sterling. It may sound convenient, but this process, known as dynamic currency conversion (DCC), is a rip-off. It allows the retailer to use an uncompetitive exchange rate that in some cases can leave you paying 3%-4% more than you would using the normal rate.

Ruth Jackson-Kirby is a freelance personal finance journalist with 17 years’ experience, writing about everything from savings accounts and credit cards to pensions, property and pet insurance.

Ruth started her career at MoneyWeek after graduating with an MA from the University of St Andrews, and she continues to contribute regular articles to our personal finance section. After leaving MoneyWeek she went on to become deputy editor of Moneywise before becoming a freelance journalist.

Ruth writes regularly for national publications including The Sunday Times, The Times, The Mail on Sunday and Good Housekeeping, among many other titles both online and offline.