Be careful when you spend abroad
Debit cards are losing their appeal in foreign climes as more banks withdraw fee-free deals, reports Chiara Cavaglieri
Saturday 18 January 2014
Debit cards are fast becoming the worst way to spend abroad. Fee-free benefits on two of the more generous current accounts have now been pulled so if you're planning a trip this year, watch out for charges.
This week Norwich & Peterborough (N&P) Building Society scrapped its Gold Light current account, which offered free overseas spending, while Metro Bank announced it will start charging for debit and credit card transactions outside Europe from 18 March.
When Metro Bank launched in 2010, the first new high-street bank in a century, perks such as fee-free spending abroad were a big attraction. The bank says it will still offer fee-free transactions in Europe, but in the rest of the world, holidaymakers will soon be charged 1.90 per cent for debit and credit card purchases, equivalent to £1.90 on a £100 transaction. Cash withdrawals will also be charged at 1.90 per cent plus a £1 ATM fee so that's a £2.90 levy on a £100 transaction.
The problem for holidaymakers is that unless you change your current account, you're stuck with your debit card, but it is still important to check with your bank what the charges are before you set off, or you risk getting a nasty shock on your return.
Andrew Hagger of MoneyComms.co.uk says: "At least if you understand the overseas charges, you can adapt your spending pattern accordingly. For example, you don't want to be making cash withdrawals or purchases of £10 or £20 if you're going to be hit with charges of £1.50-plus each time."
The vast majority of banks add on a foreign usage fee for purchases and cash withdrawals, usually around 2.75 per cent to 2.99 per cent, plus an ATM withdrawal charge of as much as £5. If you're really unlucky you could be lumbered with a debit card that charges an additional purchase fee on top, regardless of the amount. Banks hitting their customers with this extra fee include Halifax, Lloyds, TSB, RBS and Santander. For example, Lloyds and TSB customers pay a 2.99 per cent loading fee, a 2 per cent cash withdrawal fee and a £1 purchase fee, while Santander debit cardholders pay 2.75 per cent, 1.5 per cent (at least £1.99) and £1.25 respectively.
If you want to avoid these fees, there is limited choice. Metro Bank is still safe to use in Europe, and N&P offers fee-free debit card spending abroad with its N&P Gold Classic. The sticking point here is it costs £5 per month unless you can deposit £500 each month and keep a balance of £5,000.
Another option is the Nationwide FlexPlus account which offers fee-free cash withdrawals, although you still pay 2 per cent for transactions. The account carries a £10 monthly fee in exchange for a range of benefits including worldwide travel insurance for the whole family, international mobile phone insurance and UK breakdown cover as well as exclusive access to various loans, savings and mortgage rates and interest of 3 per cent on balances up to £2,500.
Various Cumberland BS current accounts will not charge you to use your card for transactions abroad but these are only open to residents within its branch-operating area (which includes Cumbria, Dumfriesshire and select parts of north Lancashire and west Northumberland).
Credit cards can be a useful alternative as several do not charge for card purchases and some, such as the Halifax Clarity Card, offer free cash advances as well, although if you do make any cash withdrawals, you will still be charged interest from the moment you take the cash out. For example, Halifax charges 12.95 per cent representative APR (the rate you get could be up to 21.95 per cent) which works out at just over £1 per month for a £100 withdrawal.
Otherwise, you can use a pre-paid currency card from the likes of Fair FX, Caxton FX, WeSwap and Travelex to avoid currency exchange costs and fees.
Elvin Eldic from Travelex says: "Prepaid cards allow travellers to lock in an exchange rate, enabling them to manage their budgets more easily. A pre-paid card is also not connected to a bank account, bringing piece of mind to those concerned about the threat of fraud or theft."
These cards are linked to the MasterCard or Visa network so you can use them as you would a debit or credit card abroad but most don't charge foreign-exchange fees when you're using the currency on that card. It is often cheaper to use a cash machine with a pre-paid card too. You simply top up your card with money from your bank account, fixing at that day's exchange rate, although there is no actual link to your bank account or credit limit so if it is lost or stolen, you only lose what's on the card.
Don't bother with pre-paid cards that carry a monthly fee and watch out for application and replacement fees, top-up fees and "inactivity fees", which penalise you if the card goes unused.
Whatever card you do decide to use, there may also be local costs that come from paying in a different currency – check that you are paying in the local currency before authorising a payment and ask for it to be changed if the value is shown in sterling.
Kevin Mountford, head of banking at Moneysupermarket, says: "Dynamic currency conversion, where the local retailer offers to convert the transaction into sterling at the point of sale, should be avoided as it's likely the exchange rate used will be less favourable than those being charged by the payment networks, Visa, MasterCard and American Express, who set the exchange rate on debit and credit cards."
- 1 This restaurant has misunderstood the concept of 'cheese and biscuits'
- 2 Raif Badawi, the Saudi Arabian blogger sentenced to 1,000 lashes, may now face death penalty
- 3 Delhi bus rapist blames dead victim for attack because 'girls are responsible for rape'
- 4 PornHub turns masturbation into energy in bid to save the planet
- 5 Have sex with your iPad thanks to the new sex toy no-one asked for
New theory could prove how life began and disprove God
This is what it's like to be dead, according to a guy who died for a bit
End of the licence fee: BBC to back radical overhaul of how it is funded
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Ukip would cut billions from Scottish budget to fund English tax cuts
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
iJobs Money & Business
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
£15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...
£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...
£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...
Day In a Page
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads