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By Emily Gorton Staff Writer
10 August 2009
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The Top Five Credit Card tips to Kickstart your Summer
In Brief:
- Fly for less with an Air Miles credit card
Compare our travel reward credit cards to fly for less.
- Use your credit card for travel insurance
Egg credit card and the Virgin credit card credit cards offer partial travel insurance.
- Prepare your Bank for High Overseas Spending
Avoid the risk of your credit card being declined by informing your credit card provider that you're going away.
- Avoid hidden charges for spending abroad
Try the Post Office credit card for worldwide 0% exchange rates.
- Get a pre-paid card to save on exchange rates
Put cash on to this type of card in advance then spend it whilst abroad at a much better exchange rate than banks or the bureau de change could offer.
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Be Covered this summer with a Travel Insurance Credit Card
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THE sun - not your financial situation - should be the only source of uncomfortable perspiration this summer.
But with the cost of holidays eating away at budgets summer is also a prime time for wallet watching.
Just follow our top five credit card tips to save money before and during your holidays.
1) Fly for less with an Air Miles credit card
Save money on travel simply by shopping for the necessaries with an Air Miles credit card.
These credit cards offer either 'points' or airmiles in exchange for spending. If you save up enough, you can often cash in not only on free flights but on free hotel and car hire.
The British Airways Premium Plus credit card, for example, offers up to 3 BA miles for each £1 spent, while the British Airways credit card offers 1 BA mile for every £1.
Other credit cards offer similar deals, often in unexpected places. With a Tesco Clubcard Credit card, for example, you are sent vouchers for all your collected points: £2.50 in vouchers is 60 air miles. With just 750 airmiles (£31.25 in clubcard vouchers) you could get return flights from London to Paris.
Both the British Airways credit cards and Virgin Atlantic White credit card require you to redeem your miles with their services but you can also pay part of the cost of the flight and then use your miles to make up the difference.
So, with 6000 BA miles, for example (which just happens to be the amount you get with your first purchase on the British Airways Platinum Plus credit card) you could pay £30 extra to go to France.
However, reward schemes are only truly beneficial if you pay off your balance in full every month and this advice is doubly true of airmiles credit card which often have high interest rates and sometimes also charge an annual fee.
The APR on the British Airways Premium Plus credit card, for example, is a mind-boggling 46.0% and there is also an annual fee of £150. To take full advantage of this credit card's rewards, then, it's essential not only to avoid accruing interest but to use your airmiles to save in excess of £150 on flights.
2) Use your credit card for travel insurance
Travel insurance is another lurking financial accessory to your holiday but, with the right credit card, you may not even notice it.
Around 75% of card providers now offer some form of travel insurance if you pay for the holiday on your credit card. This can be beneficial but it's crucial to you to check that the insurance you’re being offered is suitable for the trip.
'Travel Accident' cover, for example, is offered with some credit cards, but - cheekily - this will only cover you against accidental injury or death to yourself whilst you are literally travelling, not beforehand or during your stay at the destination itself, and it doesn't cover you for lost luggage, flight delays, medical or legal help whilst abroad.
While most travel accident cover is a nice extra, then, it's far from comprehensive travel insurance and is no replacement for the real thing. This illustrates the importance of reading the small print, with a magnifying glass if needs be. The Egg credit card and the Virgin credit card offer this kind of partial cover.
However, remember that full insurance is out there. The American Express Platinum credit card provides near-complete cover and includes medical costs, loss of luggage and travel delay claims.
3) Prepare your bank for overseas spending
The last thing you want after completing a tour of the famous caves in Majorca or devouring every last morsel of a delicious Roman lunch is for a member of staff to announce loudly that your credit card has been declined.
Many card providers will refuse your card if they consider the circumstances of the purchase to be suspicious.
As holiday destinations are obvious anomalies compared to your usual location and large amounts are often spent, it is no surprise that a small number of credit card users have seen their cards declined as a fraud risk.
So if you rarely go away don't take any risks - warn your bank or credit card provider about your holiday plans to make sure they don't cause you any embarrassment or inconvenience whilst you’re away.
4) Avoid hidden charges for spending abroad
Most credit cards charge a foreign transaction fee for spending abroad to squeeze that little bit extra out of you, this is usually 2.75% on every purchase and with some other credit card providers including American Express and HSBC it is 2.99%.
A 2.75% fee works out as £5.50 when you spend £200 with your credit card, while the same spend with a 2.99% fee will cost you £5.98.
Abroad, as with everywhere else, using your credit card to withdraw cash is inadvisable since it incurs both a high rate of interest, which starts to build up as soon as you use the ATM, and a fee, usually of around £3 or 3% of your withdrawal, whichever is higher.
As well as checking out these details on your existing credit card, you could invest in a credit card designed for the overseas user. The Santander Zero and the Post Office credit cards both come without the stress and unnecessary expense of foreign transaction fees.
Again, though, the interest on these credit cards could soon dwarf anything you saved on transaction fees so you should be prepared to pay the cards off in full every month.
5) Get a pre-paid card to save on exchange rates
If you’ve left things rather late and don’t have the time or patience to apply for a new, better-value credit card suitable for travel, a pre-paid card could be the answer.
You can put cash on to this type of card in advance then spend it whilst abroad at a much better exchange rate than banks or the bureau de change could offer. You can even top up the card whilst at your destination, either by phone or on the internet.
The FairFx pre-paid card charges no loading fee and can be topped up free of charge and the Caxton Fx does not charge a monthly fee or for ATM withdrawals.
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