Cut The Cost Of Using Your Card Abroad

Posted on: 17 June 2008 by Gareth Hargreaves

Leave more money for holiday spending by using the best credit or debit card overseas.

British holidaymakers will be charged a whopping £686 million for using their cards abroad this year, reveals research from uSwitch. Credit card customers will be charged £368 million in fees for their purchases and cash withdrawals, while debit card holders will be stung a further £318 million.

What You Should Know When You Pack Your Plastic:

Exchange rate loading fee - the average fee is 2.66% for credit cards and 2.28% on debit cards. This is added on to credit and debit card transactions (both purchases and withdrawals) made overseas by most credit and debit card companies.

Debit card purchase transaction fee - 9 debit card providers now levy this fee which is on average £1.19.

Cash withdrawal fee - this is a percentage of the withdrawal. On average it's 1.50% on debit cards and 2.67% on credit cards.

Dynamic currency conversion - typically 4%. This is when retailers convert transactions into sterling instead of the local currency. However, they should always ask for local currency to be used to avoid the 4% fee.

In total, consumers will make over 300 million overseas transactions and spend a collective £25 billion on plastic this year.

Nine banks now levy a charge for every debit card purchase made outside the UK, charging an average of £1.19 which nets the industry £65 million per year. The number of providers who now charge this fee has increased in the last year and could signal the start of a trend that will cost consumers dear if they don't wise up to these new charges.

Those who hold a debit card with a bank levying these charges should think carefully before handing their card over abroad. On a two week holiday, paying for 14 meals with a debit card, with a transaction charge of up to £1.50 for each use, the charges could soon add up to £21 with foreign exchange fees on top.

The most cost effective way to use debit cards abroad for cash withdrawals, is to take out larger sums of money in order to incur fewer withdrawal fees. Cash withdrawal fees represent a percentage of the amount withdrawn - 1.5 per cent on average - with a minimum charge of around £1.50 and a maximum of up to £5. However, some banks don't cap this amount, so consumers need to be wary and find out how much their card provider charges before using their debit card overseas. Using a credit card for cash withdrawals is normally the most expensive way to get hold of cash on holiday, as consumers will normally incur a higher rate of interest on the full withdrawal from the day it is made, on top of the other overseas charges that would normally apply.

Top Tips For Using Cards Abroad:

Check how much your bank or credit card company charge when you use your cards overseas. Nationwide's debit card is the only one that doesn't charge for making purchases or withdrawing cash overseas. However, although Nationwide and Post Office credit cards don't charge foreign exchange rate loadings, they do charge fees and interest charges for cash withdrawals.

Try to avoid withdrawing cash using your credit card as you'll be charged a cash withdrawal fee alongside a foreign exchange fee for using a cash machine abroad. You'll also normally be charged interest from the day you take the money out even if you pay the bill in full as soon as you get it.

Consumers will only benefit from Section 75 of the Consumer Credit Act if purchases are made using a credit card. Although banks do not admit liability for debit or charge card purchases, they may consider looking at a complaint as a gesture of goodwill.

Always take the 24-hour contact details for your bank or credit card provider with you on holiday. Keep them in a safe place, not your wallet, so you can call and cancel your cards if they are lost or stolen.

It's a good idea to exchange some money into the local currency using an exchange service that does not charge commission such as Marks and Spencer or Post Office.

Some banks and credit card companies ask that you tell them if you are going abroad. This could help to stop them from blocking your cards overseas if they think there are fraudulent transactions on your account.

Make sure your card company has up-to-date contact details for you - including a mobile number, especially if you are travelling overseas.

If you have taken out a new card, memorise and safeguard the PIN. Do not keep the number in the same place as your cards. Don't give it to anyone, even if they claim to be from the police or your bank. Shield your PIN with your free hand when typing it into a keypad in a shop or at a cash machine.

Always check your statement when you return from holiday to ensure there has been no fraudulent activity or spurious charges added.

Nearly all of the 'big name' providers charge exchange rate loading fees on overseas debit and credit card purchases and withdrawals, including The Royal Bank of Scotland, Lloyds TSB and HSBC. Of the providers that do not charge loading fees or transaction fees, Nationwide Building Society and the Post Office are the most notable.

"It's important that consumers are aware of these charges so they can make informed decisions about who they bank with and have a clearer picture of the actual cost of using their cards overseas, making it easier to budget," says Mike Naylor, personal finance expert at uSwitch. "At most, it is estimated that the cost to the banks of using our cards abroad ranges from around 1% to 1.5%,which is considerably lower than the current average of 2.66% on credit cards and 2.28% on debit cards."

Consumers should be mindful of the benefit of paying via a credit card as purchases are covered by Section 75 of the Consumer Credit Act. This is a valuable benefit - if goods or services costing between £100 and £30,000 are faulty, or not as they were described, consumers can recover the cost from their credit card provider or from the retailer.

In the UK people now pay by plastic more often than by cash, so when we go abroad, most of us will not give a second thought to taking out a credit or debit card to pay the bill. However, cardholders should make sure that they are fully aware of the additional charges involved when they use their card overseas, then at least they will be prepared for the big fees on their statement when they get home.

The best thing to do is to take some local currency with you that has been exchanged free of commission, suggests uSwitch. In addition, people could apply for a Nationwide debit card that doesn't charge for purchases or cash withdrawals overseas. Finally, Post Office and Nationwide's credit cards don't charge exchange rate loadings, but you will be charged for withdrawing cash.

"As a nation we are all using our cards more frequently abroad so it pays to be aware of any extra costs that may be incurred for using them overseas, as well as taking steps to protect them from fraud," warns Sandra Quinn, director of communications at APACS.

Fraud abroad on UK-issued cards totalled £207.6 million in 2007, an increase of 77 per cent from 2006, when it totalled £117.1 million.

"Card thieves are hoping to catch us relaxed and off-guard when we are overseas, so we need to take the same sensible precautions with our cards abroad as we would in the UK," reminds Quinn.

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APACS, the UK payments association, and ABTA, the travel association, have published a consumer advice guide, Using your plastic overseas, which provides tips and useful information for travellers who will be using their cards abroad this summer. The guide includes tips on what to do before, during and after your trip abroad to minimise the chances of being a victim of fraud, and provides information around the types of charges you may incur when withdrawing cash at a cash machine or when making a purchase overseas using your card. You can download it from, or

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