Money Insider: Pack the right plastic for your Easter break
Saturday 23 February 2013
With many consumers gearing up for the Easter break, it's a good time for a reminder of the charges you can incur when using your debit and credit cards abroad.
Cards may offer a secure and convenient way to pay when you're away from the UK, but the fees and charges can vary widely, so it's worth getting to grips with these before you head off.
Most providers will add on a foreign usage fee to all credit card cash and purchase transactions – in most cases around 2.75-2.99 per cent, but there are better alternatives.
Credit cards from Halifax (Clarity), Metro Bank, Saga and the Post Office don't charge any usage fee, immediately saving you up to £3 for every £100 of purchases.
But that's only half the story, as on top of the usage fee, most credit card cash withdrawals will cost you another 3 per cent, so an ATM withdrawal of £100 currency equivalent can easily cost you £6, and thus is best avoided except in an emergency.
We tend to take our debit cards for granted, particularly as they don't cost anything to use within the UK. Unfortunately it's not the same when you're overseas and it's something that holidaymakers sometimes overlook, until its too late and the charges have been debited from their account. As with credit cards there is a usage fee for cash withdrawals (2.75-2.99 per cent) plus an ATM withdrawal charge, typically between £1.50 and £5.
However, the card 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, regardless of the amount. The worst offenders are Halifax (£1.50 per purchase transaction), NatWest, RBS and Santander (all £1.25).
If you're looking for a fee-free debit card to use overseas, take a look at the cards from Norwich & Peterborough Building Society or Metro Bank.
It's worth spending a couple of minutes to check with your bank what the charges are for your particular plastic before you set 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 patterns accordingly – for example, you don't want to be making cash withdrawals or purchases of only £10 or £20 if you're going to be hit with charges of £1.50-plus each time.
Another option to consider is a prepaid currency card from the likes of Fair FX, MyTravel Cash or Travelex. The cards are chip and PIN secure, accepted wherever you see the MasterCard symbol and offer a cheaper way to pay than many debit and credit cards.
The sterling 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, so you'll know exactly what you'll be paying for all your holiday transactions.
A final warning: beware of an increasingly common custom (particularly in Europe) where the foreign retailer or ATM gives you the option to pay in pounds, known as dynamic currency conversion (DCC).
Although you know exactly how much in pounds you'll be debited, the downside is that it gives the retailer the opportunity to use an uncompetitive exchange rate, which could cost you an extra 3 or 4 per cent – avoid!
Co-operative Bank's best-buy bonds hint at what could be…
It's been a dire few years for savers, who have suffered a combination of low interest rates and high inflation, so it's refreshing to be able to report a glimmer of good news in this area.
Co-operative Bank has just launched some market-leading fixed-rate savings bonds. The one-year fixed savings bond pays 2.31 per cent AER and for three years the rate is 3 per cent AER, both products currently topping their respective best buy tables.
There's a two-year option too, at 2.5 per cent – still a good rate, but bettered by Virgin Money at 2.65 per cent with its E-Bond (Issue 26).
The big question is, is this a merely false dawn, or has the savings market bottomed out and this is the first in a series of moves that will see rates gradually pick up again?
Time will tell, and while I hope it's the latter, I fear it's going to be a long haul before we see rates anywhere near the levels they were at last autumn, before the market was decimated by the Funding for Lending scheme.
Andrew Hagger is an independent personal finance analyst from moneycomms.co.uk
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