Personal Finance News

With the peak holiday season fast approaching it’s a good time for a quick recap on the do’s and don’ts when it comes to using your plastic abroad.

There’s no doubt that our cards offer a secure and convenient way to pay for holiday spending, however the associated fees and charges can vary considerably, so it’s worth getting to grips with these before you head for the airport.

If you use a credit card overseas you’ll need to bear in mind that the majority of credit card providers will add on a foreign loading fee to all cash and purchase transactions. In most cases these charges are around 2.75% to 2.99%, however there are a few cards offering a better deal.

The Zero credit card from Santander and the Post Office credit card don’t charge any loading fee whilst the credit cards from Nationwide Building Society and SAGA don’t charge within Europe and add just 1% for overseas transactions elsewhere.

Remember that on top of this there are credit card cash withdrawal fees, as in the UK, most will cost you around 3% minimum £3, so a credit card cash withdrawal of £100 can easily set you back a combined charge of around £6.

Most of us take our debit card for granted, especially the fact that it doesn’t cost anything to use whilst in the UK. However it is a different story when you use it abroad and something that holidaymakers can sometimes overlook, until their bank statement hits the doormat and then it’s too late.

As with credit cards there is a loading fee for cash withdrawals (2.75% to 2.99%) plus a withdrawal charge typically between £1.50 and £5.00.

However the charges that catch most people out are those levied for debit card purchases which are subject to the conversion fee above, plus up to an additional £1.50 per transaction.

With sterling taking a hammering against both the Euro and US dollar in the last 18 months, your summer break will seem expensive enough as it is without having to shell out a packet on debit card charges too.

So it’s worth a couple of minutes to check with your bank what the charges are for your particular plastic before you jet off, rather than getting a nasty shock when you check your account on your return.

At least if you understand the overseas charges, you can adapt your spending pattern accordingly – for example, you don’t want to be making cash withdrawals or purchases of £10 or £20 if you’re going to be hit with charges of £1.50 plus each time.

Whilst these costs don’t sound much in isolation, if you look at a scenario where a family is on holiday for their fortnight in the sun and they make 5 debit card cash withdrawals of £100 currency equivalent and 8 debit card purchases of £50 currency equivalent, they could easily be faced with paying between £40 and £50 extra with some cards.

A final warning, whatever type of plastic you use overseas beware of an increasingly common custom (particularly in Europe) where the overseas retailer or ATM machine gives you the option to pay in pounds sterling, known as Dynamic Currency Conversion (DCC).

Whilst it may seem a good idea that you know how much you’ll be debited, the problem is that it gives the retailer the opportunity to use an uncompetitive exchange rate which could see you paying over the odds, in some cases by 3 or 4 percent.

Even though most card issuers charge a 2.75%/2.99% loading fee, opting to pay for your purchases in the local currency is often still a better option than being stung by the poor rate used in a DCC transaction.

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