You may be aware of the cost of living, but have you stopped to consider the cost of leaving? Taking credit and debit cards on holiday is a convenient and safe way to spend overseas, but if you get it wrong, then the surcharges and hidden fees associated with these cards can mount up.
Some of these fees are made explicit when you apply for the card, some are more ingrained. The key issue is that most of these charges can be avoided if you use your cards strategically, or switch to cards that are free of hidden catches.
Loading Fees
Exchange rate loading fees are an extra add on when you make transactions overseas. Your credit card exchange rate is dictated by the supplier’s wholesale rate and is usually very favourable. Once you take into account the loading fee though, typically in the region of 2.75%, you’re exchange rate becomes uncompetitive.
These loading fees are unlikely to feature on your statement either, this is why you must go through the terms and conditions of a credit card with a fine toothed comb before you apply.
Avoid loading fees by applying for cards that don’t apply them. A number of leading lenders offer cards that don’t carry loading fees.
Cash Withdrawals
You will be charged an exorbitant amount of interest on cash withdrawals overseas, and these interest payments will apply immediately. Unless you love paying a lot more interest on your borrowing that you should, try to avoid overseas cash withdrawals.
Typically, you will be charged 2% of any cash withdrawal made with a purchase credit card, or a minimum fee of £2. Cash withdrawals are also the last to be cleared from your balance, so that higher rate of interest will hang around for longer and cost you more if you don’t immediately clear the balance.
Spending Fees
These fees apply exclusively to debit cards, and are a flat rate fee that some banks put on foreign transactions. Spending fees amount, on average, to an added cost of £1.75 on each transaction. Not all banks charge these fees though, so choose carefully if you have a number of overseas trips in the pipeline.
Maybe I should leave the cards at home?
That’s not a great idea. Having credit cards abroad could be vital in an emergency, plus carrying huge amounts of cash around with you on unfamiliar territory is not recommended.
Be sure to inform your bank before you go away. If not then when you use credit card abroad, they may consider your use as unusual activity and they could potentially block it, which would prevent you from accessing your funds while you’re on holiday.
What else should I know?
Make the most of favourable exchange rates by ensuring that you pay in the local currency when using your card. This can be confirmed at the point of sale, just before you enter your pin. Also, a number of overseas banks will charge you for using their cash points. Do check, in case this is avoidable.
