Using bank cards and credit cards abroad

Using a debit or credit card abroad is quick and convenient, but is it always the cheapest option? According to Which? the cost of making payments and withdrawals abroad can add up

Based on three £50 debit card withdrawals and two £50 payments, the consumer advice organisation found that only one out of 16 major banks don't charge anything for the privilege – and the most expensive fees rise to more than £15.

Most people will use a mix of foreign currency and cards while on holiday, relying on cash for everyday payments and cards for unexpected extras. This is understandable (after all, few of us want to carry a huge wad of cash around wherever we go), but it's important to understand the fees associated with using plastic abroad – and how to avoid them.

The fees

First of all, there's the foreign loading fee. When you use a card abroad, the money is converted from the local currency to pounds sterling using the current interbank rate. In addition to this, most credit or debit cards impose an extra "loading fee", usually up to 3%, so a purchase worth £100 can cost you nearly £3 extra. Debit cards may also charge a withdrawal fee when using ATMs abroad, on top of the loading fee.

Just as in good old Blighty, some ATMs themselves charge their own fee every time you take money out. This should be clearly announced when you take out the cash – but it might not be too clear when you're navigating the menu in an unfamiliar language!

On top of all this, some credit cards charge interest whenever you use them abroad, and there are flat fees to watch out for as well. That's not even the end of it: when paying on a card abroad, you might be asked whether you want to pay in pounds or local currency (the right answer is always local currency – otherwise you'll get stung by exchange rates!)

If the worst happens and your wallet or bag is stolen during your holiday, you'll need to call your bank immediately to cancel the card. Most providers have round-the-clock services for reporting stolen cards, so that's the least painful part – the worst bit is how you're going to fund the rest of your holiday! You can have a replacement card sent to your hotel or local bank branch, but it may take a few days.

Another consideration is that your card might be frozen if you try to use it abroad without telling your bank first, potentially leading to some frustrating phone calls. Make sure you let your bank know where you're going if you want a trouble-free break.

The verdict?

The simplest and most widely accepted way to pay is good old-fashioned cash. By being smart and buying your currency in advance, the exchange rate can actually net you quite a bit of extra spending money. Cards are a great back-up, but don't rely on them too much or you might find some nasty surprises on your monthly statement!

Find out more about our travel money services here.

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