If you plan to use a debit or credit card abroad, make sure you choose one that doesn't charge outrageous fees.
While we're stuck at home 'enjoying' the delightful British summer*, other Brits have chosen to head abroad to soak up some rays. Going on holiday is an expensive business: we spend an average of almost £1,900 per family on holidays, which is far more than our European neighbours. In fact, one in five of us takes four or more holidays per year, which sounds like nice work if you can get it!
* delightful British summer = miserable monsoon weather
According to a report from banking payments group APACS, British holidaymakers and travellers spend £18 billion a year overseas on plastic cards. However, one major problem with this spending is that almost all banks charge extortionate - usually hidden - fees for foreign transactions.
Every time you buy something or withdraw cash using a credit or debit card abroad, banks add on sneaky charges. In the worst case, using a Halifax debit card, £1,000 of purchases and two £100 cash withdrawals would incur charges of £81, or an extra 6.75p for every £1 you spend. Blimey!
The first charge to beware of is a 'foreign currency loading', or 'currency conversion fee', usually around 2.75% of your card spending. Many banks do not display this as a separate fee but, instead, craftily bury it away by worsening the exchange rate you receive for your pounds sterling.
The second charge is a fee for withdrawals from cash machines, usually 2% for credit cards and 1.5% for debit cards. Some banks charge yet another fee when you use your debit card abroad, frequently a flat fee of £1.50 or a further commission of 1.5%.
Finally, you pay interest from day one on cash withdrawals made using credit cards, which typically comes to a whopping 1.5% a month until you've cleared your entire balance (18.9% APR).
At, say, 3% of our £18 billion of spending, these sneaky charges cost us an extra £540 million a year. Ouch! Nationwide BS is the genuine good guy here: its debit card and credit cards are miles better than any other cards when used abroad. Its debit card charges no fees at all; its credit cards have no foreign currency loading fee and have a cash-withdrawal fee of 1.25%, minimum £1.25.
Another excellent card is the SAGA card issued by Liverpool Victoria, which has no cash-machine fees if you use a foreign VISA cashpoint, no currency fees in the EU and only a 1% loading elsewhere abroad. However, from next January, SAGA will introduce a cash-withdrawal fee of 1.5%, minimum £1.50.
Total charges for £1,000 of
spending and two £100
cash withdrawals abroad | | |
|---|
| Debit cards | Total
charge (£) | Percentage
extra (%) |
| Halifax | 81.00 | 6.75 |
| NatWest | 58.80 | 4.90 |
| Barclays | 36.00 | 3.00 |
| HSBC | 36.00 | 3.00 |
| Lloyds TSB | 36.00 | 3.00 |
| Nationwide BS | NIL | NIL |
| Credit cards | Total
charge (£) | Percentage
extra (%) |
| Barclaycard | 40.82 | 3.40 |
| Halifax | 40.46 | 3.37 |
| NatWest | 39.82 | 3.32 |
| Lloyds TSB | 39.76 | 3.31 |
| HSBC | 36.00 | 3.00 |
| Nationwide BS | 2.50 | 0.21 |
| SAGA (in EU countries) | NIL | NIL |
So, you'd be barking mad to use any plastic abroad, other than a Nationwide BS or SAGA card. And, wherever you go, have a terrific holiday!
More: Pay a visit to our Credit Card centre | Get More Holiday Money For Less.
Cliff owns shares in HBOS, the parent company of the Halifax.
