This blog post is the fourth, and final, instalment of my Credit Card Travel Benefits Series and continues on from Credit Card Travel Benefits: Cash vs Credit Cards.
In my last blog post, I compared the use of cash and credit cards during an overseas holiday. The results concluded that, with all things considered, using credit cards for overseas travel was the better option.
In recent years, reloadable travel cards have become more popular and banks have encouraged their customers to use them while travelling overseas. Once you obtain a travel card you can load money onto it, from your bank account, in your local currency and have it converted to any of the currencies supported by the card. When you load the travel card directly from your bank account, you are not charged a conversion fee, unlike converting cash. Also, when you make purchases in foreign currency you are not charged an international transaction fee, unlike credit cards.
At face value, it would appear that travel cards are the way of the future and designed to save the consumer money while travelling. Are travel cards better than using a credit card for overseas travel? In this blog post I will compared these two options to determine which is better suited for your adventure.
To conduct a fair assessment, I will be comparing my personal credit card from my bank to the travel card that is also issued by my bank. I have an Air New Zealand Airpoints Platinum Mastercard and the travel card that is offered by my bank is called the Loaded™ for Travel card.
I will use the same example from my previous blog post and assume a European holiday for a few weeks, in which €1,500 was spent. The table below illustrates the differences in rates and fees for my credit card and the Loaded™ for Travel card. It also gives the total trip costs in NZD.
|Credit Card||Travel Card|
|Exchange Rate||0.5880||Exchange Rate||0.5755|
|Conversion Fee||1.85%||Conversion Fee||0%|
|Total Exchanged||€1,500.00||Total Exchanged||€1,500.00|
|Converted Value||$2,551.02 (NZD)||Converted Value||$2,606.43 (NZD)|
|Total Spend||$2,564.20 (NZD)||Total Spend||$2,606.43 (NZD)|
The first thing that should be noted is the rate offered by Mastercard. Their rate is better than the rate issue by the Loaded™ for Travel card, which is supported by Visa. Even with the international transaction fee considered for the credit card, it would be $42.23 NZD cheaper to use the credit card than the travel card.
This should suffice to conclude that credit cards are actually better to use while traveling overseas, compared to travel cards. However, I like to be thorough, so I will continue to assess the pros and cons of each card.
If I had used my credit card for the example above, I would have accumulated $34.01 Airpoints (equal to $34.01 NZD). This would have increased the difference to $76.24 NZD, in favour of credit cards.
I have compiled a list additional features, in the table below, which applies to both cards. These features help to explain the functionality of each card with respect to their benefit to the user.
|Features||Air New Zealand Airpoints Platinum Credit Card||Loaded™ for Travel Card|
|Global currencies||In the respective currency of over 200 countries and territories (1.85% international transaction fee)||In 11 different currencies (2.5% international transaction fee applies for all other countries and territories)|
|Ability to defer payments||Yes (44 interest free days)||No|
|Set up fee||$0||$20|
|Rewards||Yes (New Zealand Airpoints)||No|
From the list, it can be noted that the credit card is favoured in all features, excluding the annual fee. However, as I had mentioned in Credit Card Travel Benefits: The Basics, it is important to never obtain a credit card, in which the annual fees exceed your rewards. If this rule has been followed, the annual fee can be neglected.
When using the Loaded™ for Travel card in the 11 countries that are supported, no international transaction fee is charged. However, if the card is used in another country, an international transaction fee of 2.5% is charged. This exceeds the international transaction fee charged by the credit card, which is only 1.85%.
Let’s look at our previous example but assume that transactions were made in one country that uses the Euro but two other countries that use currencies that are not accepted by the travel card. An amount equivalent to €500 will be used for each country to remain consistent. Using these new currencies the total spend for the trip, using the Loaded™ for Travel card, would equal $2649.87 NZD, which is $85.67 NZD more expensive that using the credit card, even before factoring in the additional Airpoints dollars earned.
The fact that I know this information is why I have been reluctant to obtain a travel. The direct benefits of cost savings and frequent flyer points are enough to convince me to keep using credit cards for my travels. Also, the indirect benefits, such as deferred payments, help to support my argument.
Have you ever wondered why the banks are encouraging their customers to use travel cards? Here’s a hint: it’s not because they care about you. Banks are always trying to sell you something and a majority of the time it is to benefit themselves. It will cost you more to use a travel card and banks will make more money from your purchases.
It is important to do your homework regarding your expenses while travelling. I hope this blog post has been informative and made you think about how you spend overseas.
How do you spend overseas? Do you have any tips to add to my series? Let me know in the comments below.
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Dave has been on a mission, since 2010, to cross off the 100 items on his bucket list. The stories of his adventures are complimented by life lessons learned along the way and his travel tips are unique to his experiences.