Top new card for holiday spending has a big catch

If you need a flexible friend for spending abroad, this card comes up trumps - but watch out for the very nasty sting in its tail.

They say good things come to those who wait, and in terms of credit card deals, this has certainly been worth waiting for. Last summer's hit credit card, the Abbey Zero, is back, and just in time for the summer holidays...

Abbey made waves last summer when it launched the Zero card. Offering 0% on balance transfers and purchases for six months, with no balance transfer fee, no cash advance fee, and no transaction fees for use abroad, it soon became one of the most coveted flexible friends on the market.

The pluses...

Now back and revamped, one of its best features remains intact, and you'll pay no extra fees for purchases made abroad or online in a different currency.

This also comes at a time when other providers are curbing their generosity on overseas spending. This week, lovemoney.com favourite Nationwide started passing on the charge Visa imposes on all foreign transactions outside Europe, and now adds on an extra 0.84% to every sale (rising to 1% in July).

Nationwide is not the only provider to make this move, and Thomas Cook withdrew its fee-free deal on overseas spending back in April.

Now, only Abbey Zero and the Post Office credit card won't charge you any extras when you spend abroad, while the Saga credit card charges nothing extra for purchases made within Europe, and a lesser fee of 1% everywhere else.

The pitfalls...

The benefits of Abbey Zero are clear. But this time round, the card doesn't quite live up to its name, and there are a number of changes to be aware of.

For a start, Abbey Zero now charges a 3% fee for all balance transfers, not exactly what we'd expect from a card called 'Zero'.

As a concession, you do get a longer interest free period of 12 months instead of the six months it offered last time.

However, if you're planning to take advantage of the foreign transaction perks, transferring a balance to the card as well as making purchases could end up costing you more than you bargained for.

This is because Abbey, like 99% of credit cards, operates negative payment hierarchy, where any payments made are allocated to your cheapest debts first.

With Abbey's 0% offer on purchases only lasting three months, you could get stung with a nasty interest bill (Abbey Zero's typical APR is 18.9%), which will continue to grow until you clear your balance transfer.

Killing two birds with one stone won't work in this case, so if you're planning to use the card to make purchases - at home or abroad, don't transfer a balance onto it as well.

You're better off getting a separate 0% balance transfer credit card instead, to try and tackle your existing debts.

Timing is everything...

If you're planning to use the card for overseas travel, one other point worth making is to make sure you apply for the card well in advance of going on holiday.

I was one of the barrage of people who applied for a Zero last time round, and my card took over five weeks to arrive, much longer than the promised two week average.

So, if you don't want the stress of looking out for the postman every five minutes as your holiday approaches, be sure to get your application in early.

Despite the downsides, I don't want to detract from the real bonuses this card has to offer. As someone who likes to travel, I've saved at least £100 in transaction fees by using my Zero card abroad.

Bear in mind the points above before you apply, and you could save a small fortune in fees. After all, as sterling continues to slide against its fellow currencies, every little helps...

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