Using Plastic Abroad Will Cost You

Families travelling abroad for their holidays this summer are about to faced with extra charges on their plastic cards for the privilege of using cards to pay for anything from a restaurant meal to hiring a car or going to the local aqua park.

In some cases banks are taking as much as £6 out of every £100 spent abroad. Experts reckon the total figure for these hidden charges was around £326 in 2006 and could top £500 this year.

When a card is used to make a purchase of take out some cash overseas, there is at least one charge, and sometimes two, added to the transaction. The charges could cost a family of four around £40 over the course of a two-week holiday.

Most banks choose to keep these charges secret, rather than telling customers what they are on a statement. The way they do it is by manipulating the currency exchange rate which is shown on the transactions listed on a card statement.

Not content with what they already receive, the banks are pushing up the cost of using plastic cards abroad over the next few weeks – just in time for the prime holiday season. Halifax is putting up its charge for use of credit cards overseas from 2.75% to 2.95%. Therefore, for every £100 you might spend in a shop, the bank will take its cut of £2.95. Halifax is not stopping there. Its cash withdrawal charge is also going up, this from 2.5% to 3%. With a second fee of currency conversion added a withdrawal of the equivalent of £100 cash will incur a charge by the bank of £5.95. The increases are due to take effect at the beginning of August.

Lloyds TSB is another bank putting its charges up. The use of a debit card for purchases will result in a charge of 2.99% - up from 2.75%. At NatWest, with a currency conversion fee the cost of a £100 cash withdrawal would add £4.99 to the transaction as its debit card charges have gone up from 2.65% to 2.75%. Morgan Stanley has also increased its fees. In none of these cases are the fees clearly spelt out to customers.

The Independent Banking Advisory Service say that the fees being charge for overseas card use are just one type of stealth charge being applied by the banks. If mentioned at all, such fees are hidden away in the small print rather than being clearly shown, and it seems a lot of people are unaware they are charged at all when using plastic abroad.

It would seem that the banks are fighting back against efforts by lobby groups and customers to reclaim unfair charges. Last the year the banking industry was told that a penalty charge maximum of £12 was fair, where previously charges of up to £25 were common, for missing a payment. Further action is planned against charges of up to £39 for going overdrawn or bouncing a payment. Thus, the banks are seeking other ways to regain their lost income.

Some providers, notably the Nationwide and the Post Office, have no charges on the use of debit cards abroad. Consumers are advised to look carefully at what their bank might charge for use of plastic abroad.  The Halifax claim they are tweaking terms and conditions and bringing their charges into line with other providers. They say they are writing to all customers to keep them informed.

Tom Smith
25th July 2007

More Information:

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