Money News

Beware bank charges when spending abroad, warn experts

Tuesday, 7 April 2009

Writes Hazel Cottrell
hazel.cottrell@consumerchoices.co.uk

Taking a trip abroad this Easter? Then plan your spending carefully to avoid hidden credit card charges and currency exchange costs.

Charges can soon mount up if you use your credit or debit card abroad. Although spending on cards is convenient, this year’s charges are not, experts have warned.

Michelle Slade, analyst at Moneyfacts (www.moneyfacts.co.uk) advises travellers that most credit cards apply a foreign usage charge, sometimes as much as 2.99% for both purchases and transactions. On top of this, they will charge a cash handling fee if cash is taken out abroad.

Taking out £100 cash on an MBNA Europe Bank card will cost you £5.99 in charges.

Slade said that Nationwide’s (www.nationwide.co.uk) introduction of foreign usage charges (0.84% from May 6, increasing to 1% in July) to its debit and credit cards is “an extremely disappointing move” from a provider which “proudly boasted about the lack of charges in its TV adverts.”

Soon, the Post Office (www.postoffice.co.uk) will be the only credit card provider that applies no additional charges if you use your card abroad.

Slade also warns Brits spending on debit cards that they should not expect to benefit from free banking abroad, noting that debit card providers may apply charges for both purchases and cash withdrawals.

She said that withdrawing £100 cash with an Alliance and Leicester (www.alliance-leicester.co.uk) debit card will cost you £4.25 and reminded customers to be aware of the minimum charge. She warned: “If you withdraw lots of small amounts you will be hardest hit.”

“While Nationwide no longer offers free transactions abroad, it still offers the cheapest option by far if you use your debit card while on holiday,” she added.

Those planning an Easter break are also advised to shop around to get the best exchange rate on their currency. Stephen Heath, chief executive of currency exchange company FairFX (www.fairfx.com) reminds customers to work out exactly how much currency they will get for their cash from different providers, rather than being drawn in by “0% commission” deals.

He said that “people believe they are getting superior pricing” because of 0% deals, but in reality, “the lack of transparent charging means consumers can’t see the true cost of the transaction, and they are getting a poor deal.”

Research from FairFX suggests that the worst thing holidaymakers can do is wait until they arrive at the airport to exchange cash. The true cost of exchanging currency ranges from 3% to 5% at high street providers, but it can be up to as much as 15% at some regional airports.

Chris Eagle, commercial manager at CreditChoices.co.uk, hopes those jetting off abroad this Easter will enjoy themselves, but recommends that they plan their spending in advance.

He said: “If you take the time to look at the charges you may face, and find the cheapest option for spending, you can relax on holiday and won’t have to worry about any nasty surprises appearing on your statement when you return.”

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