Using a typical credit or debit card to withdraw cash on an overseas break could mean paying costly and unnecessary fees. But shop around before you go and you could avoid paying over the odds.
The financial firm Moneyfacts say a holidaymaker taking out £250 from an overseas ATM will typically face charges of £11.88. The same withdrawal on a credit card would typically attract £14.95 in fees, before interest.
Using the cards in shops and restaurants can also be costly, it says, with a £50 spend on a debit card attracting £1.38 in fees, and the same purchase on a credit card costing £1.50. The figures are based on HSBC accounts.
“Those well overdue a holiday may be paying more for their trip and the rising cost of living could also be denting their spending money,” says Rachel Springall, a finance expert at Moneyfacts.co.uk.
“Holidaymakers may then be looking to make their cash go further, and avoiding a typical debit or credit card for spending abroad is a good way to avoid wasting cash on unnecessary fees.”
The fees to look out for are transaction, conversion and withdrawal fees, which are often 2% or more of the money being spent or withdrawn. Many banks also have a minimum, which means costs can be relatively higher on small purchases and withdrawals.
Moneyfacts says there are debit and credit cards available that do not attract fees. For debit cards, that means opening a current account with the provider, which could mean committing to paying in a certain sum each month.
Starling Bank, Metro Bank and Virgin Money all offer fee-free current accounts which do not charge in Europe for using a debit card. Metro Bank and Virgin Money have transaction fees on card use in countries further afield.
Credit cards without transaction fees are available, but there will be other costs associated with this type of spending, including interest on any cash that you have withdrawn in most cases.
Barclaycard Rewards Visa, Halifax Clarity Mastercard and 118 118 Money Mastercard all allow travellers to make withdrawals and payments without extra fees and can be applied for by customers of any bank.
“Some holidaymakers may prefer to get some currency last minute at an airport or train station, but not only can these exchange rates be poor, but there is also the danger in having cash lost or stolen,” says Springall.
As a seasoned financial expert with a deep understanding of the intricacies of international travel and financial management, let me shed light on the key concepts embedded in the article, "Using a typical credit or debit card to withdraw cash on an overseas break could mean paying costly and unnecessary fees."
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Overseas Transaction Fees:
- Overseas ATM withdrawals using a typical debit card could incur charges of £11.88 for a £250 withdrawal. Similarly, a credit card withdrawal may attract £14.95 in fees, excluding interest.
- Spending £50 in shops or restaurants with a debit card might result in £1.38 in fees, while the same purchase with a credit card may cost £1.50.
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Types of Fees:
- Transaction fees, conversion fees, and withdrawal fees are highlighted as the charges to be cautious about. These fees often amount to 2% or more of the money spent or withdrawn.
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Potential Costs on Small Transactions:
- Many banks impose a minimum fee, making costs relatively higher for small purchases and withdrawals.
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Fee-Free Options:
- Moneyfacts suggests that there are debit and credit cards available that do not attract fees.
- For debit cards, fee-free options are tied to opening a current account with the provider, often requiring a commitment to a monthly deposit. Starling Bank, Metro Bank, and Virgin Money offer fee-free current accounts that don't charge in Europe for debit card use.
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Credit Card Considerations:
- Some credit cards, such as Barclaycard Rewards Visa, Halifax Clarity Mastercard, and 118 118 Money Mastercard, allow travelers to make withdrawals and payments abroad without extra fees.
- It's emphasized that while these credit cards may not have transaction fees, other costs, including interest on cash withdrawals, could apply.
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Caution Against Airport Currency Exchange:
- The article advises against getting currency last minute at an airport or train station. Exchange rates may be poor, and there is a risk of cash being lost or stolen.
In conclusion, the key takeaway is that prudent financial planning can help travelers avoid unnecessary fees associated with using credit or debit cards abroad. Exploring fee-free options, understanding the types of charges, and being cautious about last-minute currency exchanges can contribute to a more cost-effective and secure travel experience.
