Fantastic Plastic For Holidaymakers
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This article was originally sent to Fools as part of our 'The Good, The Bad and The Ugly' email series.
When it comes to overseas trips we take great care when it comes to choosing the right resort, accommodation, car hire and so on. Then again, we put hardly any effort into choosing which credit cards to take with us, which can be a costly mistake!
Of course, not all credit cards are created equal, and this is particularly the case when they are used overseas. Just as we have become accustomed to flashing our plastic here in the UK, so we do the same abroad. Indeed, we chalked up five foreign transactions for every second of 2007, with total overseas spending exceeding £12 billion.
To demonstrate how expensive spending overseas on credit cards can be, I analysed more than a hundred different cards. Here are my results:
Additional cost of foreign purchases
Card issuer | Foreign currency loading fee (%) | Extra cost of £1,000 of purchases (£) |
|---|
Nationwide BS | 0.00 | 0.00 |
Post Office | 0.00 | 0.00 |
i24 (charges an annual fee of £275)
|
0.00
|
0.00
|
Saga
|
1.00
(0.00% in the EU)
|
10.00
(0.00)
|
Leeds BS
|
2.00
|
20.00
|
Hoare & Co.
|
2.50
|
25.00
|
Egg Money
|
2.65
|
26.50
|
American Express,
BMW Amex
British Airways Amex
Nectar Amex
|
2.73
|
27.30
|
Abbey
Alliance & Leicester
aqua
ASDA
Bank of Cyprus
Bank of Ireland (UK)
Barclaycard
bmibaby
Capital One
Cheshire BS
Citi
Clydesdale Bank
Co-operative Bank
Coutts & Co.
Debenhams
Dunfermline BS
easyJet
Egg Visa
First Direct
First Trust Bank (NI)
GE Money
Hilton HHonors
House of Fraser
HSBC Bank
John Lewis and Waitrose
Lloyds TSB
Marks & Spencer
MBNA
Melton Mowbray BS
MINT
Morrisons
Mothercare
NatWest
Northern Bank (NI)
Norwich & Peterborough BS
Royal Bank of Scotland
Sainsbury's Bank
Shell
SkyCard
Smile
SonyCard
Tesco Personal Finance
The GM Card
Ulster Bank (NI)
Vanquis
Virgin Money
Yorkshire Bank
Yorkshire BS
|
2.75
|
27.50
|
AA
Amazon
Bank of Scotland
Britannia BS
Halifax
Intelligent Finance
Marriott Rewards
|
2.95
|
29.50
|
Goldfish
|
3.00
|
30.00
|
Source: Fool.co.uk's independent, unbiased search engine
As you can see, all but three of the above card issuers charge an additional ‘currency commission' when you use your credit card abroad. Typically, this fee will add 2.75% to the cost of each purchase, or £27.50 for every £1,000 spent overseas. Goldfish wins the wooden spoon in our survey for charging a ridiculous 3% for every foreign transaction.
Thus, if you play your cards badly, then you could pay an additional charge of up to 3% of the value of each purchase. Hence, if our entire foreign spending of £12 billion was made using on the most expensive plastic, then we'd forfeit around £360 million each year. Ouch!
A warning: don't use your credit card to withdraw cash overseas
By the way, if you use a credit card to withdraw cash overseas, then the fees really start to mount up. As well as the above currency-conversion fee, you pay a cash-withdrawal fee of up to 3% on top. Also, you pay interest at sky-high rates of interest (even 30% a year) from the moment you withdraw cash. So, my advice is never to do this, except in dire emergency.
On the other hand, I always take a credit card abroad, in order to enjoy the added protection afforded by Section 75 of the Consumer Credit Act. If you buy goods worth between £100 and £30,000 which later prove faulty, then you can claim against your credit-card issuer, as well as the retailer. This legal right applies to purchases in the UK and abroad, but does not cover debit cards.
In summary, if you don't want a holiday headache, then be sure to carry the right credit cards. Only those issued by Nationwide BS and the Post Office don't charge extra for overseas purchases, making them the Best Buys for foreign use. So, off you go -- and enjoy your Easter!
You can find cracking credit cards at The Motley Fool's credit card centre.
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