Buy currency before you travel, but not with a credit card
It is a good idea to buy foreign currency before your trip abroad to get the best exchange rates. But here’s why you should think twice before using your credit card for the transaction.
Vacationers should know to avoid airport offices at all costs – as a captive public, you will naturally get a mediocre rate on your foreign currency.
Instead, travelers are advised to purchase currency before their trip and use specialized overseas credit cards or prepaid cards to get the best rates. See YourMoney.com Vacation Money Checklist for more information.
However, while putting the cost of the vacation on a credit card is an option (make sure you can afford it and pay the amount with minimal interest), buying change on a credit card is usually a no. no.
The only exception is when your credit card provider also operates foreign exchange bureaus, such as Debenhams.
Richard Cole, Marketing Director at Holiday Currency Specialist Caxton, explains: “Typically, whether it’s to get cash in pounds sterling at a UK ATM or cash at a bureau de change, credit cards consider this to be a “cash advance“. Unlike buying goods, cash advances usually earn interest from the transaction in addition to the exchange rate. “
These cash advance fees are charged when you essentially withdraw cash, in the form of foreign currency. They are also often applied to gaming transactions.
Costs vary from provider to provider, so here’s a comparison of the cash advance fees charged by 10 traditional credit card providers:
All American Express credit cards have a 3% (minimum £ 3) cash advance fee when cardholders purchase currency in the UK.
In addition, the transaction also carries an annual interest rate of 27.9%. However, Amex credit card holders are not able to purchase traveller’s checks.
Barclaycard explains that buying currency using UK credit cards is like withdrawing cash and the process is subject to a non-sterling 2.99% transaction fee. The same fees also apply to anyone who purchases traveller’s checks.
Additionally, these “ cash withdrawals ” are also subject to a cash APR rate which can be found on your statement, Barclaycard said.
Most Halifax credit cards charge a 3% fee (minimum £ 3) for cash advances, with interest on these transactions ranging from 19.9% to 27.9% APR for new customers (customers existing will have different rates depending on their situation). Interest is charged daily, on any amount between the date the amount is added to the account and until it is repaid.
If you were to exchange £ 500 for euros on a standard credit card, that would mean a cash advance of £ 15 and leave you € 440.70, Halifax calculated.
However, the Halifax Clarity credit card does not charge the cash advance fee and anyone with the Halifax FlexiCard will be charged a lower interest rate between 6.4% and 14.9% APR.
There is also a 3% charge for purchasing traveler’s checks, but is not charged for Clarity cardholders.
Lloyds Bank credit cards charge a fee of 3% (minimum £ 3) for cash advances, with interest on these transactions varying between 19.9% and 27.9% APR for new customers (existing customers will have different rates depending on their situation).
Interest is charged daily, on any amount from the date the amount is added to the account until it is repaid.
However, customers with a low rate card pay interest between 6.4% and 14.9% APR.
There is also a charge of 3% for the purchase of traveller’s checks.
The purchase of traveller’s checks also incurs a 5% cash advance fee (no minimum).
In all the countries
The cash advance charge is 2.5% (minimum £ 3) of the amount purchased and is also subject to interest between 15.9% and 19.9%, charged from the date on which the transaction was applied until full payment of the amount.
Nationwide reports that the purchase APR rate was reduced by 27.9% in March 2018.
For example if you were to buy £ 250 of foreign currency you would incur a fee of £ 6.25 while for £ 500 it would incur a fee of £ 12.50 but be sure to factor in interest as well.
According to Nationwide, around 95% of merchants classify traveller’s checks as a cash transaction and purchasing them at Nationwide using your credit card incurs a 2.5% cash advance fee (minimum £ 3) and interest. cash.
Credit card customers who purchase foreign currency prior to travel at any Sainsbury’s Bank Travel Money branch will be refunded the cash advance charge.
However, purchasing UK currency from any other travel agency will result in a 3% cash advance (minimum £ 3).
While the APR / interest on these charges varies by customer, Sainsbury’s overall cash rate is 25.9%.
Sainsbury’s does not sell traveller’s checks, but adds that if other outlets sold them, Sainsbury’s credit cardholders would be subject to the same cash advance fee.
Santander Zero credit card users do not have to pay a cash transaction fee for the purchase of UK currency, but the transaction will still be subject to the 18.9% cash rate.
For All In One credit card holders (charge £ 3 per month) there will also be a 3% cash withdrawal fee (minimum £ 3) and interest (29.9%).
Although the card offers 0% on purchases for 30 months, Santander confirms that this does not apply to the purchase of currency in the UK. However, the card also offers 0.5% cash back, and Santander said this applies to transactions in the UK and abroad.
Santander adds that with both credit cards, there are no cash transaction fees when withdrawing cash abroad in local currency. But buying travelers’ checks is treated the same as providing cash at an ATM.
Tesco Bank charges a 3.99% cash transaction fee for purchases in currencies other than Pound Sterling, except for those purchased from Tesco, where these fees are waived.
But interest is charged and varies by customer, but is typically between 24.9% and 29.9%.
Exchanging £ 100, £ 250 and £ 500 in foreign currencies on a credit card would attract £ 3.99, £ 9.97 and £ 19.95 respectively before interest is applied.
You cannot buy traveller’s checks at Tesco Travel Money offices.
As a cash transaction fee, Virgin Money charges a 5% fee, with no minimum amount. The typical APR / interest on these transactions is 27.9%, applied from the day of the transaction.