Do you understand the cost for using your plastic abroad? With the summer holiday season just around the corner it's a good time for a quick recap on the dos and don'ts when it comes to using your plastic abroad.
While our debit and credit cards offer a secure and convenient way to pay when abroad, the associated fees and charges can vary considerably, so it's worth getting to grips with these before you head for the airport.
If you use a credit card overseas you'll need to bear in mind that the majority of providers will add on a foreign usage fee to all cash and purchase transactions. In most cases these charges are around 2.75 per cent to 2.99 per cent, however there are a few cards offering a better deal.
Credit cards from Santander (Zero), Halifax (Clarity), Saga and Post Office don't charge any usage fee, thus immediately saving you up to £3 per £100 of purchases.
However, that's only half the story, as on top of the usage fee, any credit card cash withdrawals will cost you around an extra 3 per cent on top, so a credit card cash withdrawal of £100 currency equivalent can easily set you back a combined charge of around £6, thus best avoided if possible.
These days we tend to take our debit card for granted, especially that it doesn't cost anything to use while in Britain. Unfortunately, it's a different story when you use it abroad and something that holidaymakers sometimes overlook, until their statement hits the doormat and then it's too late.
As with credit cards there is a usage fee for cash withdrawals (2.75 per cent to 2.99 per cent) plus a withdrawal charge typically between £1.50 and £5.
However, the charges that catch most people out are those levied for debit card purchases which are subject to the usage fee above, plus up to an additional £1.50 per transaction. If you're looking for a fee free debit card for using overseas, then take a look at the cards from Norwich & Peterborough Building Society or Metro Bank. With sterling still looking particularly weak against the Euro, your summer break will seem expensive enough as it is without having to shell out a packet on credit and debit card charges too.
So it's worth a couple of minutes to check with your bank what the charges are for your particular plastic before you jet off, rather than getting a nasty shock when you check your account on your return.
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.
While these costs don't sound much in isolation, if you look at a scenario where a family is on holiday for a fortnight and they make five debit card cash withdrawals of £100 currency equivalent and eight debit card purchases of £50 currency equivalent, they could easily be faced with paying up to £50 extra in charges with some cards.
Another option is to consider a pre-paid currency card from the likes of FairFX or CaxtonFX.
Both these providers offer you the choice of a Euro, US Dollar or multi-currency card.
The cards are chip and PIN secure, accepted wherever you see the MasterCard symbol and offer a cheaper way to pay than many high street debit and credit cards.
The Caxton FXEuro card charges no ATM fees or usage fees for purchase transactions whilst the FairFX Euro card is free for purchases but charges a flat fee of €1.50 per ATM withdrawal.
The currency cards can be loaded from your debit card and as such the exchange rate is locked in at the time the cash is transferred to the card, so you'll know exactly what you'll be paying for all your holiday transactions.
A final warning, whatever type of plastic you use overseas, beware of an increasingly common custom (particularly in Europe) where the overseas retailer or ATM machine gives you the option to pay in pounds sterling, known as dynamic currency conversion.
While it may seem a good idea that you know how much you'll be debited, the problem is that it gives the retailer the opportunity to use an uncompetitive exchange rate which could see you paying over the odds, in some cases by 3 or 4 per cent.
Even though most card issuers charge a 2.75 per cent/2.99 per cent loading fee, opting to pay for your purchases in the local currency is often still a better option than being stung by the poor rate used in a dynamic currency conversion transaction.
Andrew Hagger is money analyst at Moneynet.co.ukReuse content