Money Insider: How to keep your holiday spending under control
Saturday 05 June 2010
With the peak holiday season approaching, it is time for a recap on the dos and don'ts when it comes to using your plastic abroad.
There's no doubt cards offer a secure and convenient way to pay for holiday spending, however the associated fees and charges can vary considerably, so it's worth getting to grips with these before you head for the airport.
The majority of credit card providers add on a foreign loading fee to all cash and purchase transactions. In most cases these charges range from 2.75 per cent to 2.99 per cent.
However, there are a few cards offering better deals. Santander's Zero credit card and the Post Office credit card don't charge any loading fee, while the credit cards from Nationwide Building Society and Saga don't charge within Europe and add just 1 per cent for overseas transactions elsewhere. There will also be a fee for using your credit card to withdraw cash; most will charge a 3 per cent fee with a minimum charge of £3.
Most of us take our debit card for granted, especially because it doesn't cost anything to use when in the UK. However it is a different story abroad – something holidaymakers can sometimes overlook until their bank statement hits the doormat.
On top of the loading fee, there is also a withdrawal charge, which is typically between £1.50 and £5.00. However, the charges that catch most people out are those levied for debit card purchases which are subject to the conversion fee above, plus up to an additional £1.50 per transaction.
With sterling taking a hammering against the euro and US dollar in the last 18 months, your summer break will seem expensive enough without having to shell out a packet on debit card charges, too.
So it's worth taking 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 return.
At least if you understand the overseas charges, you can adapt your spending pattern accordingly – for example, you don't want to make cash withdrawals or purchases of £10 or £20 if you're going to be hit with charges of £1.50-plus each time.
Whilst 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 end up paying between £40 and £50 extra.
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 (DCC). Whilst 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.
Co-operative launches new fixed rate
the volume of mortgage lending in the UK remains subdued, but there's no shortage of attractive products to pick from if you're looking to move home or remortgage.
One of the most eye-catching new deals is the latest five-year, fixed rate mortgage from Co-operative Bank and Britannia which is well ahead of the competition at just 3.99 per cent with a £999 fee and available up to 75% LTV.
A five-year mortgage at less than 5 per cent has historically been considered a good deal, but a sub 4 per cent rate is very rare and likely to prove a big hit with those who prefer the peace of mind of fixed monthly repayments.
To put this deal into perspective, a 5 per cent interest rate on a £150,000 mortgage over 25 years would set you back £877 per month, but at 3.99 per cent this falls to £790 per month and would save you £5,220 over a five-year term.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
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