Beat Holiday Card FEES

The holiday card rip-off

With Britons forking out a massive £391 million a year in fees to withdraw cash abroad, we look at the best cards to help you avoid getting ripped off during your holiday.

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British holidaymakers withdrew £14.2 billion on debit and credit cards while abroad last year — forking out £391 million in fees for the privilege, according to Sainsbury's Finance. On an individual level, these debit and credit card charges equate to £41 a year.

Furthermore, you could also be stung with a heavy fee if you use your credit card to make purchases on holiday as most lenders will load a fee of between 2.5% of 3%.

So what are your options if you want to avoid getting ripped off this year?

Top pick with Halifax

By waiving fees on both spending and cash withdrawals abroad, the Halifax Clarity Credit Card is one of the most competitive travel card options on the market at present.

What's more, this card becomes even more attractive if you have a Halifax Reward Current Account and pay in at least £1,000 a month. In this case, you will be paid £5 every month you spend more than £300 on your credit card.

Although you should always aim to clear a credit balance in full each month, the card carries a relatively low 12.9% APR if this is not possible.

No commission on purchases

If you would like a credit card primarily for spending on holiday, the Post Office Credit Card charges 0% commission on purchases.

However, this card is not such an attractive option if you need to withdraw cash with a fee of 2.5% and an eye-watering 24.1% interest rate.

In addition, you could avoid a cash advance fee on your travel money if you use the card to get your currency from the Post Office. However, it would be wise to double check the Post Office actually offers a competitive exchange rate before committing yourself to anything.

If you're going on holiday soon

With the Nationwide Credit Card (15.9% APR Representative) you could benefit from unlimited commission-free purchases abroad until 31 July.

Although there may be little point applying for this offer at this point in time, existing customers going abroad in the very near future should remember to use their Nationwide card.

Once the offer has expired, the card becomes a little more complicated as the value of your commission-free purchases abroad is determined by how much you spend in the UK (this is calculated at a ratio of five-to-one).

Imagine you spent £1,000 on the card in the UK, you would be entitled to £200 worth of commission-free purchases for your next trip.

Although this card comes with a 17-month balance transfer period, borrowers with a significant credit card debt may not wish to spend on their card, which would perversely prevent you for 'earning' the commission-free spending.

[Useful: Apply for a top travel card]

Travel insurance and no commission… with a catch

In addition to fee-free cash withdrawals and purchases, the Sainsbury's Gold Credit Card offers worldwide family travel insurance and does not charge you to withdraw money or make a purchase abroad. However, you will need to pay a £5 monthly fee which equates to £60 a year.

If you have a large family and travel extensively, the insurance package has a great deal to offer — providing worldwide cover for two adults under 65 and up to six children.

Despite the numerous plus points, it would be prudent to ensure you would use all the benefits before committing yourself to the monthly fee.

Avoid a debit card disaster

Like credit cards, many debit cards also impose rip-off fees and charges for overseas usage. In fact, research from Defaqto has found the average debit card will charge a fee of £3.06 for £100 of spending abroad and £3.96 on £100 of cash withdrawals.

If you want to escape debit card fees, Norwich & Peterborough Building Society's Gold Current Account offers free usage abroad. Alternatively, existing Santander customers with the Zero Account will not pay any fees on foreign spending or purchases.

If you don't want a new debit or credit card

If you don't want to switch your bank or credit card provider, you could consider a prepaid credit card that will only allow you to spend the amount you have already paid onto the card.

Unlike conventional credit cards, prepaid products do not require you to have your credit checked which could make them suitable for those with a less-than-perfect financial history.

Remember it would be wise to shop around for the best prepaid card and Sainsbury's research found that two thirds of these cards impose a charge if you want to withdraw your money abroad. At present, FairFX and Caxton FX provide market-leading prepaid cards for use overseas.

[Useful: Compare deals on travel-friendly credit cards]

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