Don’t be stung by spending abroad

Foreign currency transactions can cost you dearly, with most credit cards charging an extra 2.75 per cent for the privilege. They also earn on the interest rate, so your next credit card statement could give a nasty surprise. According to finance portal Find.co.uk only four credit cards (i24, Nationwide, Saga and the Post Office) do not charge a fee fro converting your spending to foreign currency, and in Saga’s case this only applies within the EU. Outside the EU, a one per cent loading is charged.

In contrast, Defaqto has found that the average foreign exchange loading on credit cards is 2.66 per cent, with some cards charging almost 3 per cent. Travellers can also fall prey to dynamic currency conversion. This practice is used by some overseas retailers to convert transactions into your home currency with a poor exchange rate and a commission rate that they choose. When the transaction is presented to your card issuer, their exchange rate is used which means that you can pay 3 to 7 per cent more for the transaction.

This is a legal process if you are given the option of euros or sterling, though not all retailers do this. The best approach is to use local currency to get the best exchange rate and lowest commission charges. If direct commission charging is used without your consent, you should report this to the card issuer who will report it to VISA. If necessary merchant facilities can be withdrawn from retailers who do this without your consent.

Kate Marsden, Marketing Director of Find.co.uk says: ‘Using your credit card abroad can be a minefield, so be aware of how much your card provider is charging for foreign currency transactions and ensure that you get charged at point of sale in the local currency, rather than sterling.’