Common travel credit card features
Some common features that travel credit cards offer include:
If your card has a rewards system, you can earn points for every dollar you spend, which you can then redeem for travel expenses like flights, hotels, car rentals, and more.
Many providers offer airline points through either Qantas or Virgin, and their associated networks and partners. On sign-up, credit card providers might offer bonus points which could be enough to pay for some of your flight overseas, or upgrade to business/first class
Many travel credit cards include complimentary travel insurance, which can cover you for lost or delayed baggage, trip cancellations, and medical emergencies while traveling.
They are usually underwritten by one of the big insurers, but they might differ to retail policies. To see exactly what’s covered you’ll need to consult the product disclosure statement (PDS).
Airport lounge access
Your card might allow you access to airport lounges, which often means complimentary food and drinks and comfier seating. They can make waiting for a flight or connecting one more comfortable, and some even offer shower facilities.
No foreign transaction fees
Your travel credit card might allow you to transact overseas without paying fees for currency conversion. A run-of-the-mill credit card usually charges 2-3% on foreign transactions. On a $5 coffee, this doesn’t seem consequential, but can quickly add up if you’re travelling overseas and making hundreds of transactions.
How to compare travel credit cards
Beyond fringe benefits like having an image of your dog on your credit card, there are three main tenets of a travel card you should compare.
1. Interest rates and interest-free period
The interest rate is a crucial factor to consider when comparing travel credit cards. Typically, travel credit cards offer a higher interest rate than traditional credit cards, so it's important to check Infochoice’s comparison tables and find a card that offers a reasonable rate.
If you plan on carrying a balance on your card, low interest rates might be more relevant than rewards. It’s very important here to assess the benefits vs cost scenario if you don’t plan on paying your balance in-full every statement period.
Further, check the number of interest-free days per statement period. The standard is usually 55 days, however it could be shorter or longer depending on the product.
2. Fees and costs
Many travel credit cards come with annual fees, balance transfer fees, and transaction fees. When comparing travel credit cards, consider the fees associated with each card and weight them against the benefits you are getting to work out if it’s worth it.
Many products offer $0 annual fees in the first year, then slug you $300 or more per year thereafter. Some platinum cards can even charge upwards of $700.
If you’re just after an offer or a product for some short-term travel, you might want to reassess the annual fee and see if it stacks up against the value offered.
When choosing a travel credit card, you should look for perks that align with your travel lifestyle. If you’re regularly visiting different countries for work, you might be looking for a card with no currency conversion fees, whereas if you’re looking to spent six months backpacking in Southeast Asia, you might prioritise travel insurance. If you’re going to be in and out of airports with lots of layovers, lounge access might be very attractive.
Travel credit card rewards can include points, miles, or cashback that can be redeemed for travel-related expenses, such as flights, hotels, or rental cars. When comparing rewards, consider the earning rate for each purchase. By looking at what’s on offer and how many points it takes to get there, you can get a dollar value estimate for how much points are worth.
Alternatives to travel credit cards
At the end of the day, travel credit cards might come with high fees, and high interest rates if you don’t pay the balance in-full every statement period. A travel credit card isn’t the only way you can spend money while travelling, and many are lower cost.
Keep using your normal card
Card providers like Visa and Mastercard are used around the world. As long as the vendor accepts the type of card you use, you are good to go. Cards linked to transaction accounts usually automatically convert the money into local currency.
However, you should be aware that this normally incurs a conversion fee, which you’ll want to make sure is at a competitive rate. Your regular credit card might not come with other perks such as complimentary travel insurance, meaning you’ll need to take out your own retail policy.
If you decide to keep using your current card, it’s a good idea to let your card company know your travel plans beforehand. Transactions in a different country to where the card was issued normally flag as suspicious, so you don’t want them to cancel your card on you while you’re overseas.
Prepaid travel card or debit card
Prepaid travel cards allow you to load money onto the card and use it for purchases while traveling. They often have lower fees than credit cards and can be used anywhere that accepts major credit cards. Using a travel card means you will only be spending money you have (either a positive or a negative depending on how you spin it).
Similarly, a debit card might also have perks such as no currency conversion fees, or fee-free ATM withdrawals around the world. This might already come with your current debit card, or if not, setting up a new bank account can take as little as 5 minutes. You are also using your own funds, so no fear of interest rates and debts if you don’t pay off your statement.
Be aware when using prepaid cards or debit cards for rental car or hotel security deposits, however. Many companies will refuse to use a prepaid card as security altogether, and security deposits freeze your funds, sometimes up to weeks after you’ve handed the car back or checked-out of the hotel. If you use a credit card in this scenario, you aren’t freezing your own funds.
If you’re concerned about credit card fraud, or are just a luddite at heart, you can always withdraw a lump sum of cash and convert it into local currency. This might be a good move if you’re travelling to developing countries, which might have areas where credit card transactions aren’t commonplace.
Conversion rates can vary between facilitators, so you’ll want to compare rates to try to find the best deal. You also run the risk of two things happening: the Aussie Dollar getting a lot stronger in your time away, of which you cannot reap the benefit; and robbery/theft.
Credit cards usually come with very good fraud protection and are only a phone call away if the card gets stolen or skimmed, while cash is a lot harder to recover.