Holidaymakers heading off overseas this summer should check whether they will be charged for using their credit and debit cards abroad, or risk being stung with potentially hefty fees.
According to research by Nationwide Building Society, UK holidaymakers wasted over £650 million on what are known as ‘foreign currency exchange’ fees alone last year. These fees are imposed by most banks and building societies, and are typically 2.75 per cent, but can be up to 3 per cent, on purchases made outside the UK. That means an extra £27.50 or £30 will be added to every £1,000 spent while you are abroad.
However, there are several cards available which do not impose this fee, so if you are planning on using plastic for all your holiday expenses, it is well worth considering switching to one of them.
For example, Abbey’s Zero card, Nationwide’s Gold card, the Post Office’s credit card, and Thomas Cook’s card, all don’t charge a foreign exchange fee when used to make purchases worldwide. Saga’s Platinum card, which is only available to the over-50s, doesn’t charge the fee in EU destinations, although it does charge a one per cent fee on transactions made outside the EU.
It is, however, worth bearing in mind that even if you escape the foreign-exchange fees when buying items, if you are using a credit card, you will still usually have to pay a cash withdrawal charge when you take out money overseas. For example, Nationwide’s Gold credit card charges 2 per cent, or a minimum of £2 for cash withdrawals, as does the Post Office Platinum card.
Only Abbey’s new ‘Zero’ card, launched in April, carries no foreign exchange fees or charges on cash advances, so is well worth using for summer spending. The interest-free credit on purchases for six months will also mean you can delay the interest bills until Christmas if you want to really splash out while on holiday.
If you are relying on a credit card for your summer spending, remember to factor in the interest charges too if you don’t plan to clear your holiday debts immediately. Both Nationwide and the Post Office offer an introductory 0 per cent on purchases for the first three months and on balance transfers for 10 months, although there is a balance transfer fee in both cases. Abbey’s Zero card offers 0 per cent on purchases and balance transfers for six months, and there is no balance transfer fee.
For those who prefer to use a debit card for their holiday spending rather than running up debts, Nationwide’s Flex Account Visa Debit card is the best one to use, as it doesn’t have any foreign usage loading fees, and there is no fee for cash withdrawals abroad either.
So, make sure you check with your provider to see how much you might be being charged to use your card abroad. If the fees are steep then it may be time to make a move to a more competitive card before you pack that holiday suitcase.
By Melanie Wright