The big credit card sting

Research from USwitch.com has shown that holidaymakers who use their credit cards abroad will pay as much as £355 million in charges this year. Credit card purchases will account for £204 million of this sum, while £151 million will result from foreign currency cash withdrawals.

Credit card companies and banks charge a range of fees for customers who make purchases or withdraw cash abroad. There is usually an exchange rate loading fee (known as an administration fee or adjustment charge) of around 2.6 per cent. Cash withdrawal fees are around 2.3 per cent. Most major providers charge both of these fees, though Nationwide and the Post Office do not charge exchange rate loading fees. Customers of Lloyds TSB and RBS, says USwitch, also pay an additional transaction fee of £1 or 0.75p respectively.

Nick White, Director of Financial Services uSwitch.com, comments: ‘There are several factors for consumers to take into account when using cards abroad. Your existing debit and credit cards may not always offer the best deals for overseas cash withdrawals and purchases, so some forward planning could avoid these charges altogether. In the long term, it may end up being more sensible for some consumers to have two separate credit cards – one for UK use and one for overseas.’

There are consumer benefits to using your credit card relating to the sale of faulty goods or services, however consumers should watch out for hidden charges. These may include dynamic currency conversion, where retailers convert purchases into sterling with an additional fee of up to 4 per cent.

Nick White concludes: ‘It makes sense to take several methods of payment when you travel abroad. Take more than one credit or debit card in case one stops working and take some local currency as well – although check how much cash is covered on your travel insurance.’