Give us a break on overseas card fees

Published on Saturday 11 April 2009 13:48

HOLIDAYMAKERS going abroad for the Easter break will be hit by a double whammy of the falling pound and the soaring cost of using their plastic.

Credit card rates in general are climbing, reaching a new peak since the start of the credit crunch, despite interest rates being at a historical low.

On a typical 3,000 credit card balance, borrowers are paying an extra 26.40 compared with two years ago, according to MoneyExpert.

But those planning to use their debit or credit cards abroad this Easter or summer must be most vigilant.

They now face a barrage of additional charges every time they use their debit or credit card, which can add hundreds of pounds on to the cost of a holiday. Over the past year, these charges have leapt by 6%, which in aggregate will bring banks in an extra 754m in fees.

UK consumers should now expect average fees for using any of their plastic abroad of 3% per transaction, with the numbers of banks surcharging debit cards nearly doubled to 17 from nine last year, according to Uswitch.

Uswitch spokeswoman Tracey North warned: "Most consumers have no idea how these overseas charges work.

But most will find themselves paying transaction charges and foreign exchange levies every time they use their credit or debit card abroad. The charges on small transactions can add up the fastest."

For example, 10 10 purchases could easily cost 11.50 in additional transaction charges, before the normal exchange fees are applied.

Only the Post Office and Abbey Zero allow you to shop abroad free of foreign exchange loadings.

Even the Nationwide, which always made great play of the free foreign usage its cards offered, now plans to charge customers using their plastic outside Europe.

From May 6 it will charge consumers a 0.84% fee for credit card transactions in non-EU countries. From June 1, this will apply to debit cards too. The charge will then rise to 1% across both debit and credit cards from July.

Thomas Cook, too, will drop out of the overseas fee-free market from April 18 when it introduces a 2.5% foreign exchange fee.

This hike in charges presents customers with a problem. Do they take out a big wad of cash to minimise costs, or does shopping with debit or credit cards still have advantages?

North says: "It doesn't make sense to make lots of small transactions by debit or credit card. The most cost-effective way of using your debit card is to make a couple of big cash withdrawals. But even here be careful, as some card issuers have no maximum fee, so big withdrawals may not save you at the end of the day.

"But if you are making significant purchases then it still makes sense to use your credit card, so that you are protected by the Consumer Credit Act should anything go wrong. This normally only applies to items which cost more than 100.

"The crucial thing is to understand what the charges on your various cards are, and how they work. And then you can use them to maximum efficiency while keeping costs down."

For example:

&#149 The average debit card will charge a 1.13 transaction charge every time it is used abroad

&#149 Customers face further exchange rate loading fees of 2.75% on average for credit cards and 2.09% on debit cards.

&#149 Each time you withdraw cash expect a cash withdrawal fee of typically 1.78% on debit cards and 2.70% on credit cards.

&#149 Beware dynamic currency conversion, typically costing 4%. This is when retailers convert transactions into sterling instead of the local currency. Always ask for local currency to be used to avoid the 4% fee.

Don't forget you'll also normally be charged interest from the day you take the money out even if you pay the bill in full as soon as you get it.