Using your card abroad can cost more than you think
Paying in pounds costs Brits abroad £60m
Tuesday, 22 Nov 2005 08:47
Choosing to pay in pounds sterling when using a card overseas is costing UK residents as much as £60 million a year.
This is because, when choosing to pay in something other than the local currency, either local shops and restaurants or your card provider set the conversion rate themselves, often skimming a little extra on top.
And Nationwide, which does not charge a fee for foreign card use, is warning Brits that this conversion system could soon be rolled out to foreign ATMs as well as in shops.
The building society calculates that in July alone this year, UK residents were charged £5 million more than was needed thanks to "Dynamic Currency Conversion".
The system is used widely in Spain, Italy, Ireland, Germany, France and USA. It is most often found in restaurants, shops, car rental companies and hotels.
"We want to raise the awareness of all users of cards abroad about the potential to lose out from this so called 'service'," said Stuart Bernau, Nationwide's executive director.
"We would advise people to check any slip or bill before signing, or entering their pin. If a retailer overseas has converted the bill into pounds sterling with their own additional conversion fee attached, people should ask to be billed in the local currency."
Along with Nationwide's warning, price comparison website Moneysupermarket.com has identified other areas Brits abroad could be losing out financially by using their cards.
Moneysupermarket's top pitfalls for foreign credit card use:
Foreign currency charge - Most providers, including HSBC and Barclaycard levy a loading fee (typically 2.75 per cent) on all purchases and cash withdrawn overseas. With over £19 billion spent on credit and debit cards abroad by consumers last year, up to 2.75 per cent of this, or £541 million, is wasted in unnecessary charges. Nationwide and Lombard Direct do not levy a charge.
ATM withdrawal fee - Many also levy an additional charge of up to £2 or two per cent (whichever is greater) if a consumer uses their card to withdraw cash from a foreign ATM.
Higher interest rate charged on cash withdrawals - These incur a much higher rate of interest than normal transactions. For example, a card typically charging a standard rate of 9.9 per cent APR can see this increase to 25.4 per cent for cash withdrawals.
No "interest free" period on cash withdrawals - In addition to a higher interest rate, note also that interest is charged immediately when a cash withdrawal is made. Any interest free period that can apply to purchases made on the card does not apply to cash withdrawals. HSBC is almost alone among lenders to charge cash machine withdrawals like normal purchases.
Recommended ...
Fill in one simple form and we will put you in touch with an investments advisor who will compare investment opportunities and provide you with a free no obligation investment quote.