While it is undoubtedly very convenient to swipe your credit card when you are travelling overseas, it might be an eye-opener to know that you may be paying additional costs and fees every time you do so. Consider these statistics
Banks earn 500 million from overseas credit card usage.
According the Office of National Statistics, Britons spend more than 30 billion in foreign countries; of this, more than half is spent with credit cards.
Almost 70% of credit cards users are unaware that their credit card company levies additional surcharges and fees when they make card purchases during foreign jaunts.
If you were previously unaware of these charges, read on to find out the specific costs you could incur when you swipe your cards on non-UK soil.
Fees for Swiping your Card
When using your card abroad, you may have to pay up to 2.75% of every single purchase you make as an exchange rate loading or foreign usage fee. This means if you have bought goods worth 1000 on your credit card, you may have actually paid 1027.50 for them.
Fees for Cash Withdrawal
If you need cash whilst travelling abroad, you should try and avoid making withdrawals on your credit card as you may be subject to even further charges. Firstly, you may have to pay local cash withdrawal fees of approximately 1.5%. Secondly, you may also need to pay additional fees for withdrawing cash overseas. You may also be charged interest on the amount of cash you withdraw. This means that potentially for every 1,000 you take as cash you may end up paying 47.50 for the privilege (the equivalent of an interest rate of 4.75%)
Here you pay a bit of money, even though there are 2 ways in which currency is converted to sterling. In the older system, when you make credit card purchases abroad you pay in local currency. Visa or MasterCard then convert the purchase price to pounds when you reach home, and you pay the amount in sterling. Since the exchange rate fluctuates, you may either find yourself paying up more, or less than the day you made the purchases. In the new Dynamic Currency Conversion or DCC, the local payment vendor will inform you of the pounds sterling equivalent at the purchase point. However, although the exchange rate offered is normally quite poor, this method does help you to budget during your holiday as you are aware of the exact amount charged to your card.
The good news is that not all credit card providers charge you the same rate. If you are a savvy user, you should either be able to negotiate your card company into proving you with a more reasonable foreign usage rate or simply select a card that levies the lowest fees. This is well worth doing as by investigating possible credit card charges before you get on the plane, you may save up to 5% of your holiday costs.
There are a few credit card providers that dont charge a commission fee when you use your credit card overseas. One of these is the Post Office credit card. Comparison websites like About Your Money will compare the Post Office credit card against other credit cards. Because lets face it you are not on holiday or overseas all the time, so although this will save you money for a short period of time, will it for a longer duration.