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Spending abroad: should you use a debit, credit or prepaid card?

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10/04/2019
If you’re going abroad and you don’t want to carry cash, you have three options: a debit card, a credit card or a prepaid card. Each has its pros and cons.

A decade ago, holiday prep tended to involve a trip to the bank or Post Office to buy your foreign currency and Traveller’s Cheques. Today, all you really need for a trip abroad is a debit, credit or prepaid currency card.

All three cards have their pros and cons so it’s worth arming yourself with the facts before deciding which is right for you.

Debit cards

Debit cards are easy and convenient and are accepted in most places. But they can be expensive to use abroad.

Only four current accounts don’t charge any foreign transaction fees for using a debit card abroad, according to financial data firm Defaqto.

Metro Bank, Monzo and Starling are all free accounts, while Nationwide Flexplus comes with a £13 monthly charge. Monzo and Starling are both app-only banks so may not suit you if you’re not smartphone-savvy.

If you plan to withdraw cash from atm services abroad, watch out for fees. Only four current accounts let you withdraw cash for free – Metro Bank, Nationwide Flexplus, Starling and Monzo (although Monzo only lets you withdraw £200 a month for free and then it charges 3%).

Analysis of the whole market by Defaqto shows debit cards are the most expensive way for travellers in Europe to spend, particularly for small purchases. A daily €5 breakfast of coffee and a croissant over a fortnight could end up costing a whopping £21 in addition to the €70 spent on your breakfast.

Credit cards

Credit cards are also an easy way of spending and are accepted by most retailers.

They offer the added benefit of extra security under Section 75 on purchases costing between £100 and £30,000, meaning you should get your money back if something goes wrong.

According to Defaqto, one in six credit cards don’t charge a fee for spending in Europe, although five of these cards charge an annual fee including Natwest Reward Black, RBS Reward Black and Santander All in One.

A big downside of using a credit card abroad is withdrawing cash can be eye-wateringly expense. There is typically a hefty withdrawal fee, and interest accumulates from the day the money is withdrawn.

See table below for a list of credit cards with no foreign transaction fees in Europe.

Prepaid cards

With a prepaid card, you load on the foreign currency of your choice so you can only ever spend the balance on the card.

You can continue to top up your card when you’re travelling using a debit card, smartphone app or current account link. While they aren’t as convenient as a debit or credit card, they can be a useful budgeting tool as they help you keep a close eye on your spending.

Fee structures vary depending on which provider you go with.

Revolut, for example, is virtually free to use abroad (ATM withdrawals are free up to £200 a month then a 2% fee applies).

But some providers (TUI, Asda Money, ICE, for example) charge fees to load money onto the card from a debit card either as a percentage of the amount or a flat fee of between 50p and £3.

One point to note: you may not be able to use your prepaid card for car hire and some petrol stations may not accept them.

Credit Cards with no foreign transaction fees in Europe

Manage everything directly in the N26 app. Set payment limits, change your PIN number and lock and unlock your card. All in real-time, with N26 Card. Click here to find out more.

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