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Clare Francis: The holiday season is just around the corner but many of us heading overseas this summer will waste hundreds of millions of pounds on unnecessary credit card charges.
Using a credit card while on holiday is a popular choice because it's convenient and secure. But as Steve Willey, head of credit cards here at moneysupermarket.com, is about to explain it can end up costing you a lot more then you were expecting.
Q1: So Steve, can you just explain what charges are levied on overseas credit card transactions?
Steve Willey: There are two main transactions, and in the main they are hidden form your clear terms and conditions when you first apply for your credit card, first of all there are what you call foreign transaction fees - typically this is an amount that is loaded on top of the transaction, so for example if you spend £100, most credit card providers will charge you an additional 2.75% or 3% on top of your transactions amount, so you are looking at about £2.75 to £3.
Clare Francis: And that is what they call a handling fee?
Steve Willey: That's the 'handling fee' or 'loading fee' - sometimes they call it that.
Clare Francis: And there are also extra fees levied if you use a credit card to take money out of an ATM aren't there?
Steve Willey: That right, ATM's are almost a no-go really if you are going to use your credit card abroad, typically they will charge you - again - about 2 to 3% as a fee for using the ATM and in addition they will charge you interest on a daily basic from the date of the transaction, and typically that interest rate is a much higher rate then even your standard purchases, so normally between 19.9% and even 29.9% on the most expensive cards out there today.
Q2: So the message is just the same as here in the UK really, never use a credit card to withdraw cash from an ATM, but obviously credit cards are very attractive if you need to make a purchase in a shop or if you want to pay for a meal in a restaurant - and some cards don't levy these fees do they? Could you just tell us which are the best deals to get if you are going overseas this summer?
Steve Willey: There are three great cards out there at the moment, one is Abbey Zero, and they have zero percent on their foreign transactions, also Nationwide and the Post Office, so what's critical there is to look at what is your standard purchase APR and see which is the cheapest.
Clare Francis: That's if you can't afford to clear the balance at the end of the month?
Steve Willey: Absolutely, yes.
Q3: And are they 0% all over the world, because some cards are only free is you using them in Europe?
Steve Willey: Yes they are, right around the world, so Post Office, Nationwide and Abbey Zero
Q4: The mistake a lot of people make is that they don't plan ahead and leave it to late and they do give themselves enough time to get is now the time to get a new credit card before they are going abroad, obviously a lot of people will be heading on holiday in July/August, is now the time to be thinking about applying for a new credit card, to take advantage of one of these fee free deals?
Steve Willey: Well most card providers, if you application is automatically accepted, will take about two to three weeks to deliver your card, so you are there or there about in terms of timing, however as is more the case now, providers are asking more questions, perhaps taking longer to make a decision and it can take anything up to six weeks to receive your card, so now is the time to apply for a card to take abroad.
Q5: Are there any other useful travel tips that you have got for people how are heading overseas this year?
Steve Willey: Yes, three top tips really, number one, in terms of if you are taking travel currency, what ever you do don't buy currency at the airport, they will typically charge you a higher rate, normally 10 to 15% then what you would get through a traditional counter or an online service. Secondly is to, when you are travelling back, always pay in sterling on a airline, quite often an airline will give the ability to pay in Euros and they will exchange it back into sterling for you, they will tend to charge you a higher interest rate for doing that so just be careful there, and then finally there is a hidden charge that not many people are aware of called dynamic currency conversion and this is where if you use you card abroad, perhaps the merchant will offer you to pay in sterling as appose to the local currency, by doing that they can actually leverage there own exchange rate and make some additional money out of you, so its always best to pay in the local currency.
Clare Francis: And that way Visa or MasterCard will give you the wholesale exchange rate.
Steve Willey: They do, they always charge you the exchange rate on the day.
Clare Francis: Brilliant, thank you very much for that Steve.
Steve Willey: Thank you.
