Don’t get hit with hidden credit card charges on holiday

ANDREW HAGGER

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

Credit cards offer a secure and convenient way to pay for holiday spending, but the associated fees and charges can vary considerably.

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 per cent, but there are now a few cards offering a better deal.

Cards from Saga and the Post Office don’t charge any loading fee while Nationwide Building Society cards are fee-free within Europe and add just 1 per cent for overseas transactions elsewhere.

In addition, credit card cash withdrawal fees, as in the UK, will cost you around 3 per cent for a minimum 3, so a credit card cash withdrawal of 100 can easily set you back a combined charge of around 6.

The latest spending data shows that we are now using our debit cards more. But while we take for granted the fact that it doesn’t cost anything to use in the UK, it is a different story when you use debit cards abroad and something that holidaymakers can sometimes overlook – at least until their bank statement hits the doormat.

As with credit cards there is a loading fee for cash withdrawals (2.75 to 2.99 per cent) plus a withdrawal charge typically between 1.50 and 5.

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.

It’s worth taking a couple of minutes to check with your bank what it charges for your particular plastic before you jet off, rather than getting a nasty shock when you 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.

More people are now turning to pre-paid currency cards such as the FairFX currency card which doesn’t charge loading or withdrawal fees and offers extremely competitive exchange rates.

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).

It may seem a good idea that you know how much you’ll be debited, but 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 per cent.

Even though most card issuers charge a 2.75 or 2.99 per cent 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.

• Andrew Hagger is head of communications at www.moneynet.co.uk