Beware of hidden bank charges when going abroad, warns Jill Papworth

[Legal Beagles]

Last year we splashed our plastic to the tune of £18bn while travelling. But as Jill Papworth warns: beware the hidden charges

More...

[Amethyst]

Re: Beware of hidden bank charges when going abroad, warns Jill Papworth

Plastic cards are the increasingly popular choice for British travellers when paying for goods abroad or withdrawing cash, so it pays to be aware of the costs of using debit and credit cards overseas.
Last year, card purchases accounted for 50% of all our oversease spending - adding up to £18bn. A further £7bn was withdrawn from overseas cash machines, according to the latest figures from UK payments association, Apacs.
As long as a UK-issued card carries an international payments scheme brand such as MasterCard or Visa, you can use it at most shops and ATMs around the world, which makes it an easy and convenient way to pay. But many travellers may not realise the costs of that convenience, particularly when using debit cards which charge nothing for most transactions at home.
Michelle Slade, an analyst at financial data provider Moneyfacts.co.uk says that because UK bank customers have got used to free banking, many automatically assume they will not be charged for using their debit cards abroad. "But this is not the case," she says. "Some lenders charge customers for both retail and cash transactions."
As can be seen from the accompanying table, most banks add a currency conversion charge ranging from 2.75% to 2.99% every time you use your debit card either to withdraw cash or to pay for goods directly.
On top of that, most banks make a separate charge for withdrawing cash, and the majority now levy a retail transaction charge each time you pay for goods or services. As a result, if you use your debit card to withdraw £100-worth of currency from a foreign cash machine, our example shows you will pay from as much as £4.99 at Lloyds TSB and £4.95 at Alliance & Leicester, down to £2 at Coventry Building Society and zero at Nationwide Building Society.
Debit card users taking out cash should also be aware that most cards have a minimum charge. This means if you withdraw lots of small amounts you will be hit particularly hard, says Slade. "So it may be worth planning ahead for your financial requirements for a few days at a time."
Similarly, if you use your debit card to pay for, say, £50 worth of goods, our table shows charges range from £2.87 as a Halifax customer, down to zero if you bank with Nationwide. "It is the only provider that does not make any additional charges for using your debit card abroad," Slade confirms.
"Its FlexAccount current account does not require any minimum funding in order to take advantage of this, so it may be worth opening an account with Nationwide just for using when you are abroad, if you don't want to switch your main current account."
When it comes to using credit cards, most levy a foreign usage charge - typically 2.75% but as much as 3% in some cases - for both purchases and cash transactions.
"Taking cash out on your credit card is never advisable, even in the UK, as not only is the interest rate much higher than on purchases, but you will be charged the interest from day one," says Slade. "On top of this, you will be charged a cash handling fee, as well as the foreign usage charge if the cash is taken out abroad."
She suggests that anyone who wishes to use a credit card abroad should consider taking one out solely for foreign usage with either Abbey, Nationwide or the Post Office, none of which charge foreign usage fees.
Not surprisingly, Nationwide is quick to highlight the advantages of using its cards abroad.
It has just issued figures estimating that UK holidaymakers wasted more than £650m last year on "foreign currency loading fees" levied by rival card issuers when using their plastic cards abroad.
Jeremy Wood at Nationwide says: "People who are planning to go abroad should be aware of the hidden charges that most card providers impose, which are both costly and unnecessary. Last year we saved our customers almost £50m in foreign currency loading fees. Anyone using a Nationwide FlexAccount debit or credit card will not be charged any foreign currency usage fees on purchases and will, therefore, have extra money to enjoy while on holiday."
How to avoid a nasty shock

Apacs and travel association Abta have published a consumer advice guide for holidaymakers and business travellers who will be using their cards abroad this summer. Available to download free from choosingandusing.com or cardwatch.org.uk, it includes tips on how to minimise the chances of being a victim of fraud, plus information on charges when cards are used overseas. Its list includes:
· Make sure your card company has up-to-date contact details, including a mobile number.
· Always take the 24-hour contact phone numbers for your cards in case of loss, theft or other emergency. If your cards are registered with a card protection agency, take their contact number and your policy number with you.
· Safeguard your pin. Don't give it to anyone, even if they claim to be from the police or your bank.
· Shield your pin with your free hand when typing it into a keypad in a shop or at a cash machine.

[argentarius]

Re: Beware of hidden bank charges when going abroad, warns Jill Papworth

Rather typically for Nationwide, at the same time they are spouting the benefits of their accounts (in not charging for overseas transactions), including their irritating "shareholders' champagne" TV commercials, they are secretly plotting to remove these benefits according to anecdotal evidence from those who have been consulted for Nationwide market research.

Another example of hooking people with a promotion and reeling them in, perhaps (to allude to another Nationwide TV commercial)?