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Should I use my credit or debit card to withdraw cash abroad?

By Martin Fagan - news@consumerchoices.co.uk

How much will it cost to withdraw cash on holiday?

When using plastic abroad, loading fees, cash withdrawal fees and the occasional uncompetitive exchange rate all accumulate to add a significant chunk to your holiday spending.

So, whether you’re planning to use your card to make purchases, cash withdrawals or both, before you set off on your trip, you should make sure you know what the deal is with your own card concerning fees and charges.

Typical credit card fees for cash withdrawals

The most common charge is the cash withdrawal fee, which is self-explanatory: you pay this fee when you withdraw cash at an ATM. This fee is usually anything up to 3% of the value of the cash withdrawn or a minimum of £3 to a maximum of £5.

If that weren’t enough, on top of the cash withdrawal fee, because you’re withdrawing cash in the local currency, your card issuer will probably also hit you with the foreign loading fee, therefore withdrawing cash can mean a fee double whammy.

In addition to the fees, when a cash withdrawal is made, remember interest is charged immediately. Any interest-free period (typically over 50 days) that can apply to purchases made on the card doesn’t apply to cash withdrawals. This adds to the overall raft of charges even if you religiously clear your card’s balance every month.

Typical debit card fees for cash withdrawals

As well as credit cards, most people carry around a debit card and many believe the best course of action when abroad is to use the credit card in shops and restaurants and the debit card for withdrawing cash.

But debit cards also levy fees. As well as foreign loading and cash withdrawal fees (sometimes called the cash advance fee), debit cards can also levy spending fees, a one-off flat fee for every transaction you load on the card while abroad, which can make the repeated use of a debit card less economical than credit cards.

Things to bear in mind

Regardless of which type of card you use to withdraw cash while abroad, the chances are you’ll be hit by various types of charges and fees. The key is to pick a card that waives certain fees, although when it comes to withdrawing cash outside the UK, it’s impossible to find a card - credit or debit - that is completely fee-free.

At time of writing, the Post Office, Halifax and Nationwide all market credit cards that waive some of the more traditional fees you accumulate when using plastic abroad.

With debit cards, again it’s possible to get one that doesn’t charge a cash advance fee but, as debit cards are generally issued by the bank with which you have an account, chopping and changing is not as easy or straightforward as with a credit card.