Be Credit Card Savvy Abroad This Year

June 17, 2006

By Peter Kenny

With the summer holidays just round the corner, many of us are have not organised our finances to ensure our vacations go smoothly.

Up until recently many of us had two simple choices to make on which type of spending money we should take. Cash or travellers cheques were the only options open to us; however, over recent years this has changed dramatically. With spending using credit and debit cards rising at an unprecedented rate and cash purchases starting to fall, the use of credit and debit cards while on holiday abroad has become more common as the years go by.

As with many credit and debit card charges, too many consumers are still not aware of how much they will be charged for the use of their cards while abroad. With a little bit of forward planning these extra charges and interest could be avoided.

Foreign Usage Loading Charge

Each time a card is used while abroad a surcharge is added to the transaction. This surcharge (foreign usage loading charge) is usually around 2.75 per cent and is added by the bank or credit card company to every purchase that is made. Out of the many hundreds of credit cards available in the UK only two do not charge a worldwide foreign usage loading fee.

Cash Withdrawal Charges

As many people seldom use their credit or debit card to withdraw cash from an ATM machine while in the UK, this charge cane sometimes come as a surprise. The cash withdrawal fee is usually set at around 2% with a minimum charge of £2.00

Extra Interest Charges

It is not uncommon to see a steady stream of British holidaymakers using a cash machine. Many of these people are completely unaware that by withdrawing cash using their credit card, they will be charged interest from the day of their withdrawal, no matter if they pay their credit card balance in full. To make matters worse the interest charged for cash withdrawals is infinitely higher than the standard purchase APR.

There are some advantages of using a debit card over a credit card; however, fees are now starting to be charged for debit transactions too. Many banks are now placing a charge of £1.50 on every transaction while using a debit card.

By planning ahead consumers can limit their exposure to these extra charges. Just recently the Post Office launched a new Travel Money Card, this new offer allows people to buy a prepaid card, load it up with the currency they need (UK£, US$ or euros) and use it abroad without any foreign loading charges. There is an initial £10 fee and for ATM use there is a charge of 2.00 although as the card is prepaid there is no cash withdrawal interest to be paid.

Holidaymakers who do have to use their credit card to withdraw cash from an ATM should try planning ahead and make sure they withdraw enough cash to see them over a period of time rather than withdraw smaller more frequent amounts that will incur cash withdrawal charges.