Taking your credit card abroad this summer?

25th June 2010  

Statistically if you ask holiday makers “what’s the thing you most dread leaving behind when you leave to go on holiday” they’ll say “their credit card”. Surely it should be their passports?

Credit cards have become our favoured travelling companions, but it’s important to understand the advantages and disadvantages of using your credit card abroad. It used to be that the most cost affective way of paying for goods and services when travelling was to use your credit card. Now if you compare credit cards costs to that of say traveller’s cheques, the sums just aren’t quite the same.

Obviously when you book your holiday, paying with your credit card gives you the invaluable advantage of purchase protection if your airline or holiday company fails before you travel.

But not many people know that all your purchases abroad are also covered in the same way, including hotel bookings if you’ve organised your holiday yourself and paid with your credit card. Section 75 of the Consumer Credit Act 1974 makes your card issuer jointly liable with the company you’re buying goods or services from if something goes wrong with the transaction (for amounts between £100 and £30,000).

This means you can claim the value of a purchase from your credit card issuer, not just the amount you paid on your credit card i.e. if you paid part of the costs or a deposit.

In the past credit card companies have challenged whether Section 75 applies to purchases made overseas. In order to clear up the confusion The UK Office of Fair Trading went to the High Court to resolve the matter. It initially lost the case, but won on appeal, in 2006. This means that foreign transactions on your credit card are covered in the same way as UK ones.

But as ever, nothings for nothing, and the price we’re all paying for that now is the painful 2.5% to 3% levy the credit card companies are charging us to use our cards abroad. This added to the ubiquitous 2% to 3% we get charged to draw money from the cash-points abroad, means careful planning is needed if your not to incur unexpected costs for using your credit or debit card abroad.

But credit cards are so convenient, and of course safe. If someone steals your card and misuses it, you probably won’t be liable, so what can we do about the charges?

Well, as ever there are always credit card companies launching new products into the market, and some of them this summer are offering to process those foreign transactions for you for free, meaning you can use a credit card abroad with no real cost penalty. Compare credit cards with zero or reduced charges for using them overseas; there are prepaid and ordinary credit cards available.

Here’s more detail on Using Your Credit Card Abroad including a comprehensive download from the UK Cards Association giving your helpful advice.

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