Credit card Guides

Credit card charges abroad

Updated Tuesday, 10 March 2009

If you are planning a holiday or short-break, it's essential to know what it will cost you to use your credit card abroad.

Most people now take their debit and credit cards on holiday for the convenience and relative security offered. However these cards could end up costing you a fortune in hidden fees and foreign transaction charges.

The Post Office credit card

	0% fees on all foreign transactions

You might be aware of some of these charges; others might be new to you. But what you do need to know is that there are ways of avoiding them, simply by switching to the right cards.

In this article we explore the different fees and charges applied by credit card providers and show you how to avoid them.

Loading fees

Exchange-rate loading fees are added onto the exchange rate by your bank when you make foreign transactions. Your credit card exchange rate is dictated by the Visa/MasterCard wholesale rate so is usually very competitive, however, once your bank adds on the loading fee – typically an extra 2.75% – your exchange rate won’t be so favourable.

This fee won’t show up on your statement either so you won’t even know you’re paying it unless you check your terms and conditions.

The only way to avoid paying the loading fee is to take out a card that doesn't apply it, namely the Post Office (www.postoffice.co.uk) credit card or a Nationwide credit card. However, Nationwide cards are only fee-free in most European destinations, not worldwide.

Compare credit cards from the Post Office>>>

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Cash withdrawals

Credit card cash withdrawals make money for banks in a number of ways:

Typically you’ll be charged around 2% of the withdrawal, or a minimum of £2.
You’ll start to pay interest as soon as you take the money out.
You will probably pay a higher rate of interest on it than your typical APR.
If you check the order of payments in your terms and conditions you’ll probably find that cash transactions are the last thing to be paid off, so you’ll be paying that higher rate on the money you took out, for the life of your balance.

You should be aware that you’ll still have to pay a withdrawal fee on debit cards, but this should still be less than with a credit card.

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Spending fees

These apply to debit cards and are flat-rate charges that some banks put on foreign transactions.

Lloyds TSB currently charges £1 per transaction, Royal Bank of Scotland, Natwest (www.natwest.co.uk) and Abbey all charge £1.25, and Halifax charges £1.50 a pop.

You can avoid these charges by using a Nationwide debit card.

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Should I leave the cards at home?

No, having your plastic handy on holiday is a good idea. You’ll be able to get money out or pay for things in an emergency and they are a safe way of accessing your funds – you don’t want to walk around with a wad of cash in your pocket.

Plus, if you buy goods worth over £100 with your credit card that turn out to be faulty, "Section 75" rules mean that your bank will be responsible as well as the retailer, who might be difficult to get hold of once you get back to the UK.

You should always make sure you let your bank know you’re going away though as they might stop your card if there is “unusual” spending on it.

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Is there anything else I should know?

There are other ways that you could end up paying more than you should:

Exchange rates – Make the most of favourable exchange rates by ensuring that you pay in the local currency when using your card.
More bank fees – Some foreign banks will charge you for using their cash points so do check, in case this is avoidable.
Work out the difference – If it’s cheaper to pay the withdrawal fee than the spending fees go for the cheaper option but don’t forget the extra costs of credit card withdrawals.

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Switching cards

The best way to save on your holiday spends is to switch to better credit and debit cards – ones that apply less fees and charges on foreign spending. The difference between using your Natwest or Halifax credit cards abroad compared to a Post Office one could be substantial if you use your card a lot.

Due to ‘Section 75’ protection, if you will be making purchases worth over £100, credit cards are useful spending tool abroad. With this in mind, we recommend the Post Office credit card (www.postoffice.co.uk), as it offers 0% commission on purchases overseas.

Just as you would shop around for the best exchange rates, it is worth putting the effort in to get the best card, so why not compare credit cards now.