Ask Credit Card Finder: Can I use a 0% p.a. purchase rate card overseas?
Which transactions are eligible for the interest-free period and what other fees could apply when you take a 0% purchase rate credit card on holidays?
I’m going on holiday in January and am interested in getting a credit card with 0% p.a. interest on purchases. I’m not looking to use a credit card beyond my holiday, more as a kind of “short term” loan I can pay off over 12 months. Will the 0% p.a. purchase rate still apply overseas? What costs should I think about?
You can definitely use a 0% p.a. purchase rate credit card for your holiday, as the introductory 0% p.a. interest rate will apply to any eligible purchases you make, including when you're overseas.
This interest-free offer will apply to your everyday shopping, accommodation costs, meals and most other travel expenses. But there are some key exceptions to the types of transactions that are eligible for 0% p.a. interest.
In particular, you won't get 0% p.a. if you use the card to get foreign currency before you travel or if you withdraw cash from an ATM while you're away. Both of these transactions are classified as cash advances and would attract cash advance rates and fees.
The balance from any cash advances would also continue to attract interest until it was paid off. So if you think you'll need cash when you're overseas, which is often the case, you can avoid these credit card costs by getting foreign currency before you go or by taking a debit card or prepaid travel card that has low or no overseas ATM fees.
Another important detail to keep in mind: You will need to pay at least the minimum amount listed on each statement by the due date, even when the 0% p.a. interest rate applies.
This is usually around 2–3% of the total owed on your credit card, which means it will vary based on how much you spend. If you're overseas for a few weeks, make sure you set up Internet banking and electronic statements so that you can keep track of how much you owe and when the minimum payment is due.
There are three other main credit card costs to consider when you're choosing a card to take with you on holidays:
- The annual fee. Many of the credit cards currently offering 0% p.a. on purchases charge an annual fee. This charge is usually not eligible for the 0% p.a. purchase rate, so if you can pay it off before your trip, it will help keep the account costs down.
- Foreign transaction fees: Most credit cards charge a fee of around 2–3% when you make payments in a foreign currency. There are also some cards that offer 0% foreign transaction fees, so you may be able to find one that also offers 0% p.a. on purchases for an introductory period. For example, at the time of writing, the Bankwest Breeze Platinum offers 0% p.a. on purchases for 13 months and has no foreign transaction fees. You can read our full review of this card to help you decide if this card fits with your holiday plans.
- The revert rate. This is the interest rate that will apply when the introductory 0% p.a. purchase rate period ends. While you have said you want to pay off the card before that happens, it's good to know what the standard purchase rate will be, just in case you end up spending more than expected or want to use it in the future.
When you've got your credit card, add a note in your calendar to remind you when the 0% p.a. purchase rate period ends. You'll then be able to plan your repayments around this date once you get back from your trip.
A simple way to work this out is to divide your balance by the number of months left in the introductory period but, if you can't be bothered, just enter the details into our credit card repayment calculator and it will work it out. Happy holidays!
Ask Credit Card Finder is a weekly column written by Finder's credit card expert Amy Bradney-George. All rates and fees are correct at time of publication and we only give general advice.
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