Save money abroad, don’t pay with your debit card
If you’re jetting off, here’s how to avoid being hit by hidden, rip-off charges
HOLIDAYMAKERS are being warned to think twice before flexing their everyday plastic when spending abroad. With every transaction in a shop, hotel or bar, a combination of poor exchange rates and hidden card charges can quickly spoil the memory of a good holiday.
This dent in the pockets of holidaymakers will be made bigger by the impact of the weak pound.
Sterling is worth 12 to 14 per cent less than it was on the day of the Brexit vote, when compared with currencies such as the US dollar and euro. Thanks to the Brexit effect, travellers now get $91 and €94 less for every £500 they change, compared with this day 13 months ago.
Joanna and Mark Aitchison, from Cardiff, knew they were getting less spending money for their sterling when holidaying on the Balearic island of Majorca in May. As a result, Joanna worked hard at finding a low-cost flight and a halfboard hotel deal to offset the reduction in their spending power.
But when the couple returned home from their week-long trip they realised they had been caught by the hidden card charges trap.
Dozens of unexpected small charges added to transactions made on Joanna’s debit card – for drinks, lunches and gifts from local shops – pushed up the cost of what was meant to be a bargain holiday.
Joanna, 43, who runs a directory business with Mark, says: ‘I use my debit card all the time at home so I did not think anything of doing the same abroad.’
The couple put a €1,000 deposit for a hire car on the card and paid for their hotel stay once they arrived, unknowingly racking up fees for both transactions.
Joanna adds: ‘We already knew the exchange rate made our holiday spending quite expensive. But then to discover I had been charged for each purchase on my debit card felt a little sneaky. We had a budget for the holiday and because of this we went over it.’
Research shows that the Aitchisons are not alone in making bad holiday spending decisions.
Around 7 per cent of all money spent on holiday will be withdrawn from a cash machine while around 16 per cent of holiday spending is done on debit cards. Currency card provider FairFx estimates that in total bad holiday spending decisions cost Britons £5billion every year. Matt Hall, head of savings at bank Santander, says: ‘Holidaymakers’ pockets are already stretched but, by using a cost-effective payment method, they can at least make sure they do not inadvertently throw more money away. We would advise everyone to spend a bit of time checking out any fees or charges before making a decision about how to pay for their holiday spending.’
Rachel Springall, financial expert at money data scrutineer Moneyfacts, says: ‘While consumers get protection from theft when using their plastic abroad, some debit and credit cards will charge eye-watering fees each time cash is withdrawn or a purchase made.
‘A typical debit card charges £9.50 when consumers withdraw £200 of cash abroad while some credit cards can charge nearly £12 before interest is applied.’
Last week, the Treasury announced a ban on the charges that many online retailers – and some shops – apply when processing purchases made via a debit or credit card. This will apply from the start of next year and be Europe-wide. But it will not stop banks applying foreign usage fees or overseas cash machine providers charging a fee for withdrawing cash.
Here is how to avoid falling into the tourist spending trap.
CASH IS KING
IF YOU do prefer to pay in cash when abroad, then be sure to get your currency ahead of travelling.
Comparison websites such as Travel Money Max can flag up the best rates and the nearest branches where currency can be bought. Many foreign exchange companies will deliver your spending money for a small fee or let you collect in person for free.
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PEER-TO-PEER
WEBSITES such as WeSwap now let you buy currency from people who have come back from holiday with spare dollars or euros.
The idea is that both buyer and seller get a better exchange rate than on the high street. But the downside is you have to wait seven days to get it unless you want to pay a fee, so it is not for those heading off on a last-minute getaway.
Money you buy is loaded on to a card, like a currency card (see below), and you can then withdraw cash from an ATM. But there are charges if you only withdraw small amounts.
CURRENCY TRAPS TO AVOID
IF YOU pay for anything on plastic while abroad remember to always use the local currency. It means you will not fall prey to so-called dynamic currency conversion where the local bank sets the exchange rate in its favour, not yours.
Do not exchange your money at the airport. A bureau de change in a departure lounge knows you are a captive customer so will invariably offer you a dismal exchange rate.
If you have left it to the last minute it can often be better to wait until you get to your destination before buying your dollars or euros.
Stick to your holiday budget. It is easy to overspend when you are converting foreign currency into pounds in your head.
Downloading a budgeting app where you can log each purchase can help you keep track of your holiday spending.