The price of easy money

Tempted to draw cash on a credit card abroad? Beware the hidden costs, says Mark MacKenzie

Anyone who has spent precious holiday time trudging around in search of a foreign exchange bureau to cash their traveller's cheques will be familiar with the sinking feeling that comes when, bureau finally located, they find themselves in receipt of rather less cash than they had expected.

Excessive transaction rates, along with good old-fashioned convenience have, unsurprisingly, made use of credit cards when travelling overseas increasingly popular. But how many of us can say we know exactly what charges we are incurring with our flexible friends?

"There are a number of charges that customers need to take into account when using credit cards abroad," says Michelle Slade, a credit card specialist with Moneyfacts, the online publisher of financial advice whose website, moneyfacts.co.uk, offers regularly updated comparisons of the deals available through Britain's major card issuers.

"Not only are customers charged the standard purchase APR or cash per annum, but they are also charged what is known as foreign usage loading." This loading, explains Ms Slade, can bump up the price of any purchase; with a typical rate of around 2.75 per cent - a fee which applies in addition to the standard interest schedule of most cards.

By far the least prudent way of financing yourself with a credit card overseas is withdrawing cash from an overseas ATM, however small the amount. "Consumers should be aware of the cash handling fee," says Ms Slade, which in the case of some cards is charged in addition to both foreign usage loading and standard interest. Debit cards also carry their own scale of charges. "Handling fees apply both in the UK and abroad," says Ms Slade, "[and] can be as much as three per cent, with a minimum charge of £3. Taking cash out abroad on your credit card is a very expensive way of borrowing."

So holidaymakers who enjoy the convenience of credit cards may be interested to learn that the Post Office last week announced that new holders of its credit card, issued by Mastercard, will no longer be charged foreign usage loading when using their cards abroad, a deal which applies to both cash withdrawals and purchases.

The Post Office is not the first card supplier to cancel foreign loading - that was the Nationwide Building Society, which dropped the charge in 1997. What makes the Post Office move significant, however, is that it comes from Britain's leading provider of foreign currency. With more than 2,600 branches, the Post Office will this year handle around 15 million foreign exchange transactions, with a total value of £2.6bn. Including traveller's cheques, they will dispense close to 80 different currencies.

"Foreign loading isn't exactly a hidden charge but neither is it particularly transparent," says Gary Fitton, head of lending at the Post Office. "When you take a card out the interest schedule will always be set down in the terms and conditions of the card issuer but most of us don't pay all that much attention to anything but the basic interest rate.

"If they have taken heed of the charges, by the time people come round to using their cards they've forgotten about them, particularly if they're enjoying themselves abroad."

The changes to the Post Office's card will initially only apply to new customers, but Mr Fitton says the facility should be available to all cardholders within the next few months.

"One thing you have always got when using a credit card overseas is an exchange rate that compares favourably with most local foreign exchange bureaux. Without foreign usage loading that obviously makes the deal even better."

Michelle Slade concurs, adding that, as card issuers increasingly compete for business, it pays consumers to shop around.

"While Nationwide and the Post Office don't charge foreign usage loading, wherever you use your card in the world," she says, " [companies such as] Saga won't charge for using your card in the EU and will then charge one per cent for using your card anywhere else in the world."

Sport
Luis Suarez and Lionel Messi during Barcelona training in August
footballPete Jenson co-ghost wrote Suarez’s autobiography and reveals how desperate he's been to return
News
newsMcKamey Manor says 'there is no escape until the tour is completed'
Voices
Hunted: A stag lies dead on Jura, where David Cameron holidays and has himself stalked deer
voicesThe Scotland I know is becoming a playground for the rich
News
people
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Arts and Entertainment
Architect Frank Gehry is regarded by many as the most important architect of the modern era
arts + entsGehry has declared that 98 per cent of modern architecture is "s**t"
Arts and Entertainment
Soul singer Sam Smith cleared up at the Mobo awards this week
newsSam Smith’s Mobo triumph is just the latest example of a trend
News
Laurence Easeman and Russell Brand
people
Travel
ebookHow to enjoy the perfect short break in 20 great cities
Sport
Fans of Dulwich Hamlet FC at their ground Champion Hill
footballFans are rejecting the £2,000 season tickets, officious stewarding, and airline-stadium sponsorship
Arts and Entertainment
Benedict Cumberbatch has refused to deny his involvement in the upcoming new Star Wars film
film
Sport
football
News
news
News
people

Britain First criticised for using actress's memory to draw attention to their 'hate-filled home page'

Independent Travel Videos
Independent Travel Videos
Simon Calder in Amsterdam
Independent Travel Videos
Simon Calder in Giverny
Independent Travel Videos
Simon Calder in St John's
Independent Travel Videos
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Travel

    Junior Application Support Engineer (ERP / SSRS)

    £23000 - £30000 per annum + pension, 25days holiday: Ashdown Group: An industr...

    IT Systems Analyst / Application Support Engineer (ERP / SSRS)

    £23000 - £30000 per annum + pension, 25days holiday: Ashdown Group: An industr...

    SCRUM Master

    £30 - 50k (DOE) + Benefits: Guru Careers: We are seeking a SCRUM Master to joi...

    Franchise Support Assistant

    £13,520: Recruitment Genius: As this role can be customer facing at times, the...

    Day In a Page

    Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

    Wilko Johnson, now the bad news

    Former Dr Feelgood splits with manager after police investigate assault claims
    Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

    Mark Udall: The Democrat Senator with a fight on his hands

    The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
    New discoveries show more contact between far-flung prehistoric humans than had been thought

    New discoveries show more contact between far-flung prehistoric humans than had been thought

    Evidence found of contact between Easter Islanders and South America
    Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

    Cerys Matthews on Dylan Thomas

    The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
    DIY is not fun and we've finally realised this as a nation

    Homebase closures: 'DIY is not fun'

    Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
    The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

    Air New Zealand's wizard in-flight video

    The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
    Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

    Pumpkin spice is the flavour of the month

    The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
    11 best sonic skincare brushes

    11 best sonic skincare brushes

    Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
    Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

    Paul Scholes column

    I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    While other sports are stalked by corruption, we are an easy target for the critics
    Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

    Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

    Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
    Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

    Lost in translation: Western monikers

    Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
    Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

    Handy hacks that make life easier

    New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
    KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

    KidZania: It's a small world

    The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker