hether it's a tank of petrol, the latest DVD or a bottle of water from the supermarket, paying with a debit card is often more convenient than using cash. But what many consumers don't realise is that, in some circumstances, this "free" transaction may be costing them money.
If you have a Visa debit card, rather than a Switch debit card, you may find yourself out of pocket when you buy foreign currency in the UK.
A hidden charge, as much as 2 per cent of the cash you are exchanging, is levied on current accounts by several high-street banks if they are part of the Visa debit card payment system. This is added to the commission you may have already been charged for the transaction.
Banks offering Switch cards - including NatWest, Royal Bank of Scotland, HSBC, Halifax and Bank of Scotland - tend to absorb the fee charged by the Switch network on behalf of their customers. But Lloyds TSB, Barclays, Abbey, Alliance & Leicester and the Co-op pass on the fee levied by Visa.
For example, all customers buying currency at a Travelex bureau de change have to pay 1.5 per cent commission for any amount over £200. So if they are changing £500, they will be charged £7.50. But people using a Co-op Visa debit card, say, face paying another £10 - 2 per cent of the £500 - for a total bill of £17.50. A Switch debit card user would pay £10 less, and could even save the entire £17.50 by going to the Post Office, where there is no commission on foreign currency.
"It's not a consumer charge but, passed on, it's a hidden charge," says Mike Naylor, senior researcher at the Consumers' Association. "There's usually a distinction between using a credit card and a debit card, but not one between debit cards."
The charge arises because Visa's "interchange" banking process creates a handling fee for foreign currency purchase in the UK - a charge borne by the banks that issue Visa debit cards.
Of the six biggest high-street institutions, five pass this charge on to customers. All blame Visa, pointing out that the charge can be found in the small print of their debit card accounts. Only one provider, Nationwide, absorbs the extra cost.
Fran Valmana, spokesman for Visa, says the main benefit is the extensive network of outlets accepting the cards. "Visa allows your card to be used overseas, whereas Switch won't. It compensates customers for having to pay the fee. Perhaps that's why there is a difference. Customers need to look at what they get for their money."
In light of Visa's stance, customers of HBOS should keep an eye on developments. The group's banks - Halifax, Bank of Scotland and Intelligent Finance - are considering a move from Switch to Visa debit, possibly next year, as the Switch system is rebranded under the Maestro banner in a push to boost Maestro's use around the world.
One way to avoid the charge is to go to a cash machine, withdraw the money and head for the exchange bureau. But you will have to weigh up the risk of carrying large amounts of cash on you.
The cheapest way to buy your foreign currency is to shop around. The Post Offer offers commission-free currency but it's worth ringing the number below, before you turn up at your local branch, to ensure they've got what you want.
Lloyds TSB is waiving commission on foreign currency until 31 December both for its own customers and those of other banks. Remember, however, to check the exchange rate, as you might be able to get a better deal elsewhere - even after paying commission.
If you use your debit card to pay for small items, watch out for hidden costs. Some small convenience stores charge both Switch and Visa debit card users a fee for buying goods worth less than, say, £5. The British Retail Consortium says this recovers the cost charged to them by their bank.
Buying goods online can also involve a fee, depending on the retailer, but this is usually much less than the charge for using a credit card. For example, the online transaction fee for buying a Ryanair flight is cheaper if you pay by debit card (£1) than credit card (£4).
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