Using a credit card abroad

Using a credit card abroad is usually safe, convenient and often cheaper than changing cash, but most cards add a charge every time you spend in a foreign currency. Most credit cards add a foreign transaction fee of around 3% on non-sterling purchases and cash withdrawals¹, and Which? puts the typical charge at up to 2.99% each time you use a credit card abroad². On top of that, taking cash out of an ATM on a credit card usually costs around 3% with a minimum of £3, and interest starts from the day of the withdrawal².

The good news is that the charges are predictable and avoidable. A small number of cards charge nothing for overseas spending, and the biggest single saving costs nothing at all: when a card machine abroad asks whether you want to pay in pounds or the local currency, choosing the local currency gets you a better exchange rate³. This page explains each cost, how the exchange rate is set, which cards waive the fees, and the protections that travel with your card.

Foreign transaction fees: often around 3% per purchase

The foreign transaction fee, sometimes called a non-sterling transaction fee or a commission charge, is the main cost of using a credit card abroad. Most credit card companies charge a commission when you use your card abroad⁵, and the typical size of that charge is consistent across the independent sources: around 3% of what you spend. Which?'s guide to credit card costs puts it at around 3% on non-sterling purchases and cash withdrawals¹, and its spending-abroad advice says you will typically pay up to 2.99% each time you use a credit card². The same pattern applies to debit cards: MoneyHelper notes that current accounts often add a foreign exchange fee of around 3% of the transaction amount when you use a debit card abroad⁶.

The fee is charged on each transaction, so it applies every time, not once per trip. That matters for small purchases. Which? gives the example that spending just £5 with a card that charges fees could set you back £1.15, an additional 23%². The percentage is the same whatever the amount, but the effect is proportionally heavier on small spends because any minimum or fixed elements of a fee bite hardest there.

The fee is not the only thing to check before you travel. Citizens Advice lists using the card abroad as one of the charges to look for in your credit agreement, alongside going over your credit limit and late payments⁷. Some cards also charge an annual fee simply for having them⁵, which is worth weighing against any overseas saving if you only travel occasionally. If you are comparing cards, the types of credit card page explains what each kind is for, and credit card fees and charges sets out the domestic costs to compare against.

How Visa, Mastercard and American Express set the exchange rate

When you pay in a foreign currency, the conversion from that currency to pounds is not done by your card provider. It is done by the card scheme whose logo is on your card, such as Visa or Mastercard, which applies its own wholesale exchange rate for that day. Your card provider then adds its foreign transaction fee on top. That is why two cards on the same scheme, from different banks, can convert the same purchase at the same underlying rate but cost different amounts in total.

Behind the scenes, there is a further cost that has grown since the UK left the EU. The Payment Systems Regulator reports that shortly after the EU withdrawal, Mastercard and Visa increased interchange fees for card-not-present transactions using consumer debit and credit cards between the UK and the EEA: Mastercard's rate rose from 0.2% to 1.15%, and Visa's from 0.3% to 1.5%⁸. Interchange is the fee the shop's bank pays your card's issuer on each transaction, and it is ultimately reflected in the costs of card acceptance. The regulator opened a market review to understand the rationale for these increases and their impact on UK services users⁹, and its final report examined Mastercard and Visa debit and credit cards issued in the EEA for online retail transactions with UK businesses¹⁰.

For you as a cardholder, none of this changes what you do: the exchange rate you get is the scheme's rate, and the foreign transaction fee is your provider's charge. But it explains why the cost of cross-border card payments has been under review, and why the total cost of a foreign purchase can be higher than it was a few years ago. The regulation and policy section explains how reviews like this one feed into the rules card providers follow.

Always pay in local currency, not pounds

The single most expensive mistake people make with cards abroad happens at the till, not in the fees. When a card terminal abroad asks whether you want to be charged in pounds or in the local currency, this is dynamic currency conversion: the shop or machine operator offers to do the currency conversion for you, at a rate it sets. ABTA's travel money advice is to choose the local currency when you are asked, because you will get a better exchange rate³.

The reason is simple. If you choose the local currency, the amount is converted by the card scheme at its wholesale rate, and your only extra cost is your card's foreign transaction fee. If you choose pounds, the operator converts the amount at its own rate, which is set to include a margin in its favour, and you still pay your card's foreign transaction fee because the underlying transaction is in a foreign currency. You can lose out twice on the same purchase.

The same principle applies in reverse in one narrow situation: official guidance for payments to UK government bodies says overseas payments should be made in sterling, and your bank may charge you if you use any other currency¹³. That is about paying a UK authority from abroad, not about spending abroad. When you are the customer standing at a foreign till, the local currency is the choice that protects you. The dedicated comparison page on paying in pounds or local currency goes deeper into how dynamic currency conversion works.

Taking cash out abroad costs more than paying by card

Withdrawing cash on a credit card abroad is the most expensive way to spend, and the costs stack up. Which? reports you can expect a fee of around 3% with a minimum of £3 when you take money out of an ATM with a credit card². Citizens Advice warns that if you withdraw cash on a credit card abroad you may be charged a foreign transaction fee on top of the usual cash advance fee⁵, and separately notes a cash handling fee of around 2% of the amount withdrawn⁵. So a single withdrawal abroad can attract the cash fee, the foreign transaction fee and the exchange margin all at once.

The bigger cost is interest. Cash withdrawals on a credit card are cash advances, and interest is added to your account straight away, even if you pay off the balance by the due date⁵. StepChange puts it plainly:

Which?'s explanation of credit card interest confirms that this is usually charged immediately, even if you repay your balance in full¹⁵, and that the interest rate for cash advances is usually higher than the rate for purchases⁵. Buying foreign currency with a credit card is treated the same way: you will be charged a cash advance fee, most providers charge a higher APR, and you get no interest-free period even if the bill is repaid in full and on time¹.

Prepaid currency cards have their own cash quirks: Which? found that some charge fees for withdrawing cash in the UK, and it may be cheaper to pay for purchases directly¹⁶. The full picture of cash costs at home and abroad is on the cash withdrawals page.

Travel credit cards with no overseas fees

A travel credit card is simply a credit card that does not add a foreign transaction fee, so the only currency cost is the card scheme's exchange rate. These cards exist, and they change the maths of spending abroad: a card that adds a fee charges it on top of every overseas purchase, while a no-fee card adds nothing beyond the exchange rate itself. Several providers offer cards with no fees for use abroad, including the Zable travel credit card with zero transaction fees¹⁷, the Virgin Money Travel Credit Card with no foreign exchange fees¹⁸, and the Vanquis Travel Credit Card with zero foreign transaction fees on overseas transactions¹⁹.

Some of the best-known fee-free options for spending abroad are not traditional credit cards. Klarna's debit card carries no foreign exchange fees when spending abroad or in other currencies²⁰, and PayPal's debit card has no fees for using it abroad²¹. PayPal also offers a credit card, but that one charges a fee when used abroad²¹, which shows that a brand can be fee-free on one card and not another: the fee belongs to the specific card, not the brand. When comparing, check the individual card's terms rather than assuming.

Who a travel card suits depends on circumstances. A no-foreign-fee credit card suits someone who spends abroad regularly, clears their balance in full each month so no purchase interest builds up, and wants Section 75 protection on overseas purchases. It suits a person who mainly wants cash abroad less well, because cash advances still cost fees and immediate interest even on cards with no foreign transaction fee. Someone who travels once a year may find a debit card with no overseas fees, or a prepaid currency card, does the job without a credit check. The rewards and cashback page covers cards that pay back on spending, some of which also waive overseas fees.

Credit card, debit card or prepaid card for travel

Each way of paying abroad has a different cost structure and different protections, and the right one depends on how you travel.

A prepaid card is one you load up with foreign currency before you travel, and abroad it can be used like a debit card³. Its strength is certainty: the exchange rate is fixed when you load, which helps with budgeting, and there is no credit check. Its weakness is that it does not carry Section 75 protection, because that applies only to credit cards, and access to your money depends on the card operator staying solvent, a risk Which? has documented with prepaid foreign currency cards¹⁶.

A debit card keeps things simple and spends your own money, but the fees can be higher than people expect: MoneyHelper notes both the percentage fee and the per-use charge of typically £1 to £3, except for euros in the EU⁶. A credit card costs a foreign transaction fee on most cards but brings the strongest legal protection on purchases, as the next section explains. Many travellers carry more than one: a credit card for large purchases such as hotels and flights, and a debit or prepaid card for day-to-day spending. The credit card vs debit card comparison sets out the differences in full.

Section 75 protection on purchases from £100 to £30,000

The strongest reason to put overseas spending on a credit card rather than any other payment method is Section 75 of the Consumer Credit Act. It applies to credit card purchases costing more than £100 and up to £30,000, and MoneyHelper confirms it covers items in that range even if you are only paying some of that amount on your credit card⁴. The protection applies to credit cards, not charge cards or debit cards, and it works abroad as well as at home: Which? notes that Section 75 still applies to purchases made from overseas websites²².

On holiday, the protection is most visible with package holidays. Using a credit card to book a package holiday gives you extra protection under Section 75²³, and it can cover holidays costing more than £100 and up to £30,000²⁴. If a holiday company fails or you do not get what you paid for, you can make a Section 75 claim with your card provider²⁵. ABTA makes the same point about protected payments: payments between £100 and £30,000 made by credit card are protected if the goods or services paid for have not been provided²⁶.

The claim is against your card provider, not the shop or hotel, which is what makes it so useful abroad: you do not have to pursue a foreign trader through a foreign system. A Section 75 claim is a legal right to claim from the card provider if something goes wrong with a purchase, and it includes paying a deposit by credit card, even if the deposit itself is less than £100, as long as the item or service costs within the range²⁷. The full rules, including the exclusions, are on the Section 75 page, and the step-by-step process is on how to make a Section 75 claim.

Where the card surcharge ban does not apply

In the UK, retailers and traders are no longer allowed to charge you a surcharge for using a credit or debit card when making a purchase²⁸. The ban comes from the Payment Services Regulations 2017, and the legislation states it directly:

The ban itself is set out in the Payment Services Regulations 2017, which state that a payee must not charge a payer any fee in respect of payment by means of a card-based payment instrument that is not a commercial card²⁹. In plain terms, retailers and traders are no longer allowed to charge you a surcharge for using your credit or debit card when making a purchase²⁹.

That ban does not necessarily travel with you. Citizens Advice identifies two gaps: you can still be charged extra if your bank or the seller's bank is outside the European Economic Area, and you can also still be charged if you are using a business card⁵. So a shop in a country outside the EEA, or one whose bank is outside the EEA, may lawfully add a card fee under its own rules.

There is a second, less visible change since Brexit. The UK's interchange fee caps no longer apply to consumer cross-border card payments between the UK and the EU, or any other third country, where either the acquirer or the issuer is based outside the UK's jurisdiction³⁰. The Payment Systems Regulator explains that these payments are no longer subject to the interchange fee caps established under the UK or EU versions of the Interchange Fee Regulation³¹. This is a cost borne by the businesses accepting cards rather than a charge you will see on a receipt, but it is part of why card acceptance costs differ between countries and why some shops abroad add fees or set minimum spends. The detail of the UK ban is on the surcharge ban page.

When your card is blocked, lost or disputed abroad

A card being refused abroad is usually not a fault but a fraud check. ABTA's advice is to tell your card provider you are going away, because if you do not, they could block your card if they think it is being used fraudulently³. Citizens Advice makes the same point from the other side: if the card company is suspicious about sudden unusual spending, it may freeze your card, so it is worth checking before you go⁵. Setting a travel notice in your provider's app, or carrying a second card from a different provider, covers most of this risk.

If your card is lost or stolen abroad, report it to your bank immediately³². Take Five, the national fraud awareness campaign, also advises keeping your card secure and in sight, along with all your other travel documents, especially when out and about³³. Its holiday fraud guidance covers the scams that target travellers specifically, such as fake booking sites³³. If someone uses your card without permission, your provider should return the money; if it will not, Citizens Advice says to report the matter to Trading Standards³⁴.

Disputes about overseas purchases follow the same routes as domestic ones. You can ask your card provider to reverse a transaction under chargeback, or claim under Section 75 for qualifying purchases, and escalate to the Financial Ombudsman Service if the provider refuses. Credit cards generate a lot of complaints: the ombudsman recorded 6,600 new credit card complaints in one quarter, with a 25% uphold rate³⁵, so a meaningful share of complaints about cards are decided in the customer's favour. The chargeback and complaining about a credit card provider pages set out each route.