Be a card sharp and don’t lose money by us­ing yours abroad

Hol­i­day­mak­ers who use plas­tic are pay­ing the price for banks los­ing out on penalty over­draft fees

The Daily Telegraph - Your Money - - Credit And Debit Cards - By Harriet Meyer

TRAV­ELLERS head­ing over­seas this Bank Hol­i­day week­end should think twice be­fore us­ing their credit or debit card abroad.

Hol­i­day­mak­ers paid banks and build­ing so­ci­eties more than £700m in charges for pay­ing by plas­tic over­seas last year, ac­cord­ing to in­de­pen­dent statis­ti­cians at money­facts.co.uk.

While many trav­ellers find credit and debit cards are a con­ve­nient way to pay while away, this comes at a hefty price if you are hit by an ar­ray of hid­den charges. Th­ese in­clude for­eign cur­rency load­ing fees, trans­ac­tion fees, and cash ma­chine with­drawal fees.

Bank prof­its are un­der pres­sure from court rul­ings against penalty over­draft charges and credit card de­fault fees. So they have been push­ing up charges else­where.

For ex­am­ple, ear­lier this month Cly­des­dale raised the load­ing fee on its credit card by a quar­ter point to 2.75pc, while last month Lloyds TSB in­creased the for­eign load­ing fee when us­ing its debit card over­seas by 0.24 of a per­cent­age point to 2.99pc.

A load­ing fee is charged by the card is­suer when you use your credit or debit card over­seas for a pur­chase or to with­draw cash. Typ­i­cally this equals 2.75pc of the trans­ac­tion value. So if you spend £1,000 on your card on hol­i­day you could be charged £27.50 in load­ing fees alone.

In ad­di­tion, a trans­ac­tion fee may be charged on over­seas pur­chases us­ing a debit card. For ex­am­ple, th­ese can add £1.50 to the cost of a sin­gle pur­chase with Hal­i­fax debit cards over­seas.

Mak­ing a trip to the cash­point will not en­able you to es­cape th­ese fees. When with­draw­ing cash, you face a load­ing fee in ad­di­tion to a cash with­drawal fee.

Take the Lloyds TSB debit card, which now charges a 2.99pc load­ing fee and 1.5pc fee for over­seas cash with­drawals. So a cus­tomer with­draw­ing £1,000 abroad would pay al­most £45 ex­tra, in the form of a £29.90 load­ing fee and a £15 with­drawal fee.

If you use a credit card, the with­drawal fee is even more ex­pen­sive, at around 2.5pc, and you face a higher rate of in­ter­est on your debt.

Rob Ken­ley, head of cards at Mon­ey­su­per­mar­ket.com, warned: “Never use a credit card to with­draw money from a for­eign cash­point, be­cause you will be charged a cash with­drawal fee, load­ing fee, and a higher rate of in­ter­est than your nor­mal an­nual per­cent­age rate (APR).”

An­other con­sid­er­a­tion is that any in­ter­est-free pe­riod that ap­plies to pur­chases made on the card does not ap­ply to cash with­drawals, so you will start rack­ing up in­ter­est im­me­di­ately.

To see if you might fall vic­tim to un­nec­es­sary charges when us­ing your card, read the sum­mary boxes in card leaflets. Our ta­ble out­lines the cost of mak­ing a pur­chase or cash with­drawal for €100 us­ing a variety of ma­jor credit and debit cards.

If you want to use a debit card abroad which does not charges th­ese fees, open a Na­tion­wide Flex Ac­count to ben­e­fit from a card that does not charge load­ing, cash with­drawal or trans­ac­tion fees.

Whether in the UK or abroad you will al­ways be charged around 2.5pc for with­draw­ing cash us­ing a credit card. Nei­ther Na­tion­wide nor the Post Of­fice levy over­seas load­ing fees on their cards for pur­chases or with­drawals.

Mr Ken­ley added: “An­other provider to con­sider is Saga, which does not charge a load­ing fee on its credit card when it is used in the Euro­pean Union.”

An­other fac­tor for hol­i­day­mak­ers to beware of while abroad is known as a ‘dy­namic cur­rency con­ver­sion’, which is be­com­ing in­creas­ingly com­mon with for­eign re­tail­ers. Rather than the card be­ing billed in the lo­cal cur­rency, the shop, ho­tel or restau­rant is given the choice of con­vert­ing the sum into ster­ling.

In the­ory, this al­lows cus­tomers to choose whether to pay in the lo­cal cur­rency of the coun­try they are in or their own cur­rency. Mr Ken­ley said: “Never pay for a for­eign trans­ac­tion in ster­ling. You should po­litely de­cline a re­tailer who of­fers you this op­tion as ex­change rates are up to 3pc higher than those used by Visa or MasterCard.”

Other op­tions for tak­ing money abroad in­clude trav­ellers’ cheques and cur­rency. Com­mis­sion-free deals are com­mon­place, but you need to con­sider the ex­change rate on of­fer to work out how good a deal it re­ally is.

One al­ter­na­tive is to use pre­pay travel cards such as the one re­cently launched by Bar­clays, as th­ese are free of the var­i­ous charges on pur­chases – al­though you may have to pay to buy the card in the first place, and there is a mark-up on the ex­change rate when load­ing it. Th­ese pre­pay cards look like credit cards and carry the Visa, MasterCard or Amex logo, but are loaded with ei­ther US dol­lars or euros. A small fee of around £2 will usu­ally be charged when us­ing them at cash­points.

Andrew Hag­ger from money­facts.co.uk said: “Pre­pay cards can be an at­trac­tive way for younger peo­ple to pay for travel, with par­ents able to top up the card from home and also limit the spend­ing avail­able.

“As they are not linked to your bank ac­count, the risk of iden­tity theft is re­duced if the card be­comes lost or stolen.”

The cards can be topped up over the phone or on­line. Some have chip and per­sonal iden­ti­fi­ca­tion num­ber (Pin) se­cu­rity and all can be frozen if lost or stolen.

Mr Hag­ger added: “Which­ever method you choose, make sure you are aware of any costs which may be charged, but equally as im­por­tant make sure the method suits your needs, the coun­try you are trav­el­ling to, and al­ways have a back-up in case of theft.”

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