Cocktails: £15. Dinner in a candlelit restaurant: £60. A good bottle of Rioja:
£25. Being ripped off by your credit-card company: priceless. Credit and
debit cards might seem like the safest and most convenient way to spend
overseas, but few travellers realise that the banks are grabbing a fistful
of dollars every time we pay with plastic.
The procedure’s name sounds respectable enough – they call it foreign-exchange
(forex) loading – but it amounts to an average 2.75% on top of every
overseas transaction, meaning that a £100 dinner actually costs £102.75.
Unless you own a Virgin credit card, which is upping its load to 2.99% on
April 1, or the Goldfish MasterCard, which charges a whopping 3%.
Try settling that supper tab with a debit card instead and your bank will
charge you a transaction fee on top of the forex load. The banks claim this
covers the cost of processing your purchase, and it can be as high as £1.25
for Natwest customers and £1.50 for Halifax clients, for whom a fiver’s
worth of ice cream costs £6.50.
But, since the bank is also taking a transaction fee from the restaurant –
about 2.5% for credit cards and up to 50p for debit cards – you might think
the best solution for you and your host is to nip along to the cash machine.
Think again. Public outrage stopped the banks charging for domestic
cash-machine withdrawals eight years ago, but use your Natwest debit card at
any overseas ATM and you will pay at least £2 for the privilege. Lloyds TSB
will snatch up to £4.50, and Royal Bank of Scotland cardholders can be
fleeced for a maximum of £5.
But the worst is yet to come: the Tony Soprano of all card scams is the
“dynamic currency-conversion fee”. It works like this: your waiter (or a
foreign bank’s ATM) asks if you’d like to be charged in sterling, rather
than euros, yen, dollars or rupees. This seems convenient, as the real-time
currency conversion – that’s the dynamic bit – allows you to see just how
much that supper cost. Not only that, there’ll be no nasty surprises on your
statement when you get home.
But the merchant is really on the make. Dynamic currency conversion allows him
to overcharge you by converting your purchase at a more profitable exchange
rate than that used by your credit-card company. Then he charges you for the
service – which can add another 4% to your bill. So, that £100 dinner could
end up costing more than £108.
So, how do you sidestep the rip-off merchants? By choosing the right card.
Both the Nationwide Building Society’s Visa card and the Post Office
MasterCard have no foreign-exchange loading fees, so if the bill is £100,
that’s what you’ll pay – although they’ll charge you £3 and £2 respectively
to take money from the wall.
The best product of all also comes from the Nationwide, which won the “most
responsible credit card” title at January’s thrilling 2008 Card Awards
ceremony. Take the Nationwide debit card away with you – you need to have
opened a current account with the society to qualify – and you’ll pay no
cash-withdrawal fees, no transaction charges and no loading costs. Spend
£1,000 on holiday, making 10 purchases and five cash withdrawals with your
debit card, and you’ll save as much as £50. Which is enough for two more
bottles of Rioja.
Since moving to France nearly four years ago we have consistently advised people who stay with us when house hunting to open a Nationwde account before moving over themselves. I know very few ex-pats who don't keep a Nationwide account to handle money transfers on a day to day basis. They really are the best.
Frances Nustedt, Beaumarches, France
If you hold a NatWest Maestro debit/credit card, reside in UK and try to withdraw cash from an ATM machine in Malaysia, the machine won't cooperate, even though you have informed the bank of your planned Asian vacation. Can't imagine having a steady stream of destitute Brits on its doorstep exactly overjoys the Embassy. HSBC (NatWest's representative bank in Malaysia) admitted that the root of NatWest's arbitrary decision was essentially racism. Namely, by designating Malaysia as a high white-collar crime area. Kettle-pot-black.
Andrew Milner, Karuizawa, Japan
I have had a co-operative c/card for 5 years becauce of the very low interest rate i never needed to change to 0% offers I had a £11300 LIMIT NEVER OWED MORE THAN £9000 NEVER ACURD A PENALTY FOR GOING OVER LIMIT or LATE PAYMENT all ways paid more than minimum before due date after a holiday in auz got my balance under £6000 then on my October statemrent my limit reduced to £5800 so that I had a large credit fall back if needed I made a payment of £4000 to bring my outstnding amount to just under £1750 and they reduced my limited again to £1750 when I enquired why they had reduced it again after 5 years of being a good customer who they told me to check my credit rateting it seems they are the ones with the bad record not me
peter clutterbuck, mundesley, norfolk
Dynamic Currency Conversion, as you point out, can be helpful in determining exactly how much you are spending; an important tool for both vacationing travelers and business travelers. The abuse comes not from the process, but rather from unscupulous and greedy merchants and banks. I recommend that travelers look for merchants who offer FX Assured, a DCC program that guarentees that the conversion rate will be lower then that used by the card issuing bank and requires that the merchant ask the traveler if they want DCC and explain what it means.
Jeff Birnberg, Brentford, United Kingdom