With fewer people using traveller’s cheques and not many of us wanting to risk carrying large amounts of foreign currency around, there is nothing like having plastic with us when we are holidaying abroad. However, the internet site uSwitch contend that UK customers will pay a staggering £355million this year in charges for using our debit and credit cards abroad. It seems that many of us are blissfully unaware of just how much our banks are charging us for the convenience of using cards for purchases or cash withdrawals abroad.
The perks of Nationwide
The savvy traveller is probably well aware that Nationwide has for some considerable time been the best card to have with you abroad. It allows free ATM withdrawals using its debit card, and fee-free purchases with either its debit or credit cards, passing on the exchange rate which they get direct to the customer. In fact, the only fee you pay is if you withdraw cash on your credit card and even that is the cheapest of all the major banks. Many travellers may not, however, know about the Post Office credit card which does not charge for cash withdrawals or have a loading for currency exchange rates. It also gives a three month interest-free period on purchases. Customers with a Saga or LV credit card do not have to pay any currency loading in the EU and only 1% elsewhere.
The hidden dangers of spending abroad
HSBC has come in for criticism of its recent advertising campaign which suggested that customers with a Bank Account Plus could use their debit cards free of charge at foreign ATMs. Although no withdrawal fee is levied, a 2.75% charge is added to the foreign currency exchange rate. HSBC say in their defence that this is not a fee but merely part of the way in which they calculate their exchange rate. They are not alone in charging the exchange rate transaction fee and, if you use your debit card to take out cash abroad, all the major banks apart from Nationwide charge this 2.75% loading plus another transaction fee, either flat rate or a percentage with a minimum and maximum applying. For a withdrawal of £100 cash you will pay a total of between £4.25 and £ 4.75.
If you want to use your debit card for paying for goods abroad you should be aware that most of the banks charge for this. There is typically an exchange rate transaction fee of 2.75% plus an additional fee of between £1 (Lloyds TSB) and £1.75 (Nat West). Three exceptions are HSBC and Barclays (which only charge the 2.75% exchange rate fee) along with Nationwide of course.
It is always cheaper to take money out of an ATM using a debit rather than a credit card but, if you want to use your credit card, you will pay between £2 (Nationwide) and £5.75 (Halifax) for a withdrawal of £100. If using your credit card for paying a retailer abroad, be prepared for the 2.75% currency exchange rate addition from Barclays, Halifax, HSBC, Lloyds TSB and Nat West.
To conclude, it seems time that we started reading the small print more carefully and perhaps consider opening up an account with Nationwide or the Post Office, even if we only use the cards on foreign holidays. With so much appearing in the media at the moment about unfair bank charges, this seems to be yet another area where banks are profiting excessively from their customers.
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