Brits Waste £335m On Overseas Credit Card Charges

The use of credit and debit cards abroad is costing British holidaymakers around £335m in avoidable charges. Being aware of the various costs incurred when using credit or debit cards abroad could save holidaymakers millions of pounds each year.

With July and August set to see the annual migration of British families to sunnier climes for the school holidays, online financial comparison site, moneysupermarket.com, has issued some pointers on how to get the best from your credit card this summer when overseas.

“ Spending on plastic is a popular and convenient choice for many Brits abroad. Yet, the costs of doing so if you do not use the 'right' card can well outweigh the benefits,” said Robert Kenley, head of credit cards at moneysupermarket.

“ Even consumers savvy enough to be aware of loading fees and ATM charges also need to bear in mind the downside of dynamic currency conversion.

“ Before setting off it’s worth taking the time to ensure the credit card in your holiday wallet is not going to subject you to any unnecessary fees and charges.”

Below are some tips from Moneysupermarket on how to avoid those charges:

• Foreign currency charge - Most card providers levy a loading fee for currency exchange (typically 2.75 per cent) on all purchases and cash withdrawn overseas. With over £19 billion spent on credit and debit cards abroad by consumers last year, up to 2.75 per cent of this, or £541 million, is wasted in unnecessary charges. Nationwide does not levy a charge for foreign use.
• ATM withdrawal fee – On top of the foreign currency charge, many providers also levy an additional charge of up to £2.50 or 2.5 per cent (whichever is greater) on to your card bill when you use your card to withdraw cash from a foreign ATM.
• Higher rate of interest on cash withdrawals – Cash withdrawals abroad incur a much higher rate of interest than domestic transactions. For example, the Halifax One card typically charges a standard rate of 9.9 per cent APR. This increases to a whopping 22.95 per cent for cash withdrawals.
• No "interest free" period on cash withdrawals - In addition to a higher interest rate, note also that interest is charged immediately when a cash withdrawal is made. Any interest free period that can apply to purchases made on the card does not apply to cash withdrawals.
• Dynamic Currency Conversion - This is a 'hidden' cost that holidaymakers are unlikely to be aware of. Irrespective of which card you use to pay for goods overseas, some retailers will levy a 'dynamic currency conversion' - i.e. they will convert the price of the goods from their domestic currency, such as euros, into British pounds at their own conversion rate, costing you more for your purchase. This is not always evident when you sign your bill, so beware.

Alisdair Milton
13th July 2006

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