Be card smart

Smart Money Secrets

Be card smart and keep your holiday spending in check

With the summer holiday season fast approaching now’s a good time to check whether your debit or credit card is a cheap option if you plan to use it in foreign climes.

It may be that you need to consider applying for a different card in advance of your trip, and one that isn’t going to cost you an arm and a leg when used outside the UK.

Traditional debit and credit cards may offer a secure and convenient way to pay, but the fees and charges vary greatly and are often an expensive way to pay when abroad, so it’s worth thinking of a cheaper alternative before you travel.

With credit card transactions, most banks add a foreign usage fee to all ATM cash withdrawals and purchases. In most cases it’s around 2.75 per cent to 2.99 per cent extra.

But that’s only half the story; on top of the foreign usage fee, most credit cards charge a withdrawal fee of about three per cent extra. So £100 worth of Euros from the hole in the wall can easily set you back a combined charge of around £6.

We tend to take our debit cards for granted, especially as they don’t cost anything to use whilst in the UK. Unfortunately it’s not the same when you’re overseas and it’s something that holidaymakers sometimes overlook.

As with credit cards, there is a similar usage fee for cash withdrawals, plus an ATM withdrawal charge typically between £1.50 and £5.00.

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

The worst offenders are Halifax (£1.50 per purchase transaction), Santander (£1.25), Lloyds Bank and TSB (both £1).

If you’re looking for a fee free-debit card for using overseas, consider a current account with Norwich & Peterborough Building Society or Metro Bank.

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

Prepaid currency cards from Centtrip, Access Prepaid, FairFX and myTravelCash are amongst the most competitive according to my recent research and the cost savings make it worth carrying a specialist travel card along with your passport whenever you venture overseas.

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

Although it may seem like a good idea to know exactly how much you’ll be debited, the downside is that it gives the retailer the opportunity to use an uncompetitive exchange rate which could see you paying way over the odds – the golden rule is never pay in British pounds when abroad.

Article by Andrew Hagger
Independent Personal Finance Analyst