Foreign transaction fees will make your travel budget shrink

Credit card companies make money from travelers in a range of ways. Besides charging you interest on your purchases, and even higher interest on cash advances, they also charge foreign transaction fees whenever you buy in a currency not your own. So, for a Londoner traveling to France, each purchase charged to a credit card will also be charged a transaction fee ranging from 1.5% to 3%.

The transaction fees do add up to a nasty surprise when back home, as each Euro 100 purchase now comes back looking like Euro 103 instead. Doesn't seem like very much, but that's enough for a nice meal which instead ends up being paid to your credit card company. Don't think just the British are getting ripped off by these fees, it happens to American credit card holders as well, Cory Doctorow posted about this on BoingBoing.

Luckily, there are cards out there that don't charge these fees. If you're living in the United Kingdom, try credit cards from the Post Office or Nationwide Building Society. Their cards carry no foreign transaction fees and will save you money both while away, and while shopping from home at international e-commerce sites.

So, if you're heading for a late summer holiday this year, it's a good idea to apply for the Post Office 'Classic' credit card, for example. For more examples of credit cards suitable for foreign purchases and holidays, hop on over to Credit Card Comparison Online and compare credit cards to use abroad.

Now that you have a credit card that works well abroad, go ahead and read about another trick to part you from your holiday cash: Dynamic Currency Conversion, common in Spain.