Bitterwallet Guide to Currency Exchange: Picking The Right Credit/Debit Card For Abroad
Having made the mistake of using my credit card abroad during my younger innocent years, I've learned that there are a few key things you want to look for when using it abroad: (a) withdrawal fees (b) spending penalties (c) interests, and (d) additional loads on the foreign exchange rate.
In the process, I've developed my own streamlined process of obtaining and using foreign currency at the best rates possible, and hope this guide will help you ease through the process and save you from fees and rates that chow down the pounds you could potentially be saving, just by picking the right card for you.
1. Know your credit cards: With so many cards out there, it's worth investigating what the best ones are for using abroad. As of this moment, Abbey Zero is my personal top choice. It's a Mastercard, which goes by rates from xe.com. My second choice would be Nationwide and Post Office. They have no foreign exchange loads, but both cards charge a minimal withdrawal fee (2.5% for a £3 minimum) which make them less appealing. Abbey Zero has no withdrawal fees and no exchange rate load. I spent about 2 months pondering whether to get one, only to realise all it took was a visit to a local Abbey Branch and got it sorted within a few days.
2. Pay off your cards in full: My Abbey Zero is setup with direct debit to pay off in full at the end of every month. A bit anal I know, but this ensures that I don’t end up paying more with interest rates. The downside of the Abbey Zero is a high (25.9%) withdrawal interest rate, even if you paid the card in full. Nationwide has a withdrawal interest of 22.9%, while Post Office takes 20.83%. Finally, Saga is worth a quick mention, due to having no currency exchange load in the EU. It has, however, a 1% charge outside the continent, and a withdrawal fee of 2% for a minimum of £2.
3. Hedge your bets: Along with a healthy amount of cash at the best exchange rate possible obtained prior to departure, I carry cards I can use abroad with the best terms possible (discussed below). How do I decide when to use cash or my card? I subscribe to the xe.com daily currency update, which notifies me of any major fluctuations by text (to a local sim to avoid roaming charges), along with email updates. With the current fluctuant market, currency exchange is a potential roller coaster ride. So when the exchange rate improves above the cash rate I exchanged, I will use my Abbey Zero to save a few pounds. Should it drop significantly, I use cash. That way, I cover both directions.
4. Debit card option: As law dictates (specifically Section 75), your purchases are insured with a credit card abroad. If you've purchased defective or unclaimed goods or services ranging from £100-£30,000, you can barge right through the credit company’s front doors to demand they refund your money's worth. But if I were to pick a debit card for overseas use, I would go with Nationwide's Flexaccount Visa Debit Card. It has no currency exchange load, no withdrawal charges, and is free from interest (as long as you haven't maxed out all your money.) All you need is to open an account at Nationwide. The account doesn’t have the best terms of service nor interest rates, but having it to load for usage abroad could come in handy. I wish I followed through with my application!
5. Avoid certain cards: Your bank probably charges sky-high rates for using your card abroad, especially if you have an RBS Debit Card, Halifax Debit Card, Lloyds Debit Card, and Natwest Debit Card. Halifax and IF have a spending penalty of £1.50. RBS and Natwest have a 2% withdrawal fee. Lloyds, on the other hand, has a whopping 2.99% currency exchange load. I therefore keep all my regular bank cards in a different wallet (the British Bitter Wallet, that is) to ensure I don’t accidentally use them, especially on an alcohol fueled night.
Finally, having the right card and knowing when to use it is just one way to hedge your currency. I will discuss tactics and methods I use to get the best exchange rate possible prior to leaving the UK in another post. If you have any tips / suggestions, please share them in the comments below.