Using Credit Cards overseas will normally include charges.  The overseas banks will charge your provider for using their machines and this will be passed on to you.  Most people understand that your card will cost you more to use overseas and so we expect it, however you can get around it by choosing the right card.  Firstly you need to understand how cards may charge you.

 

There are four main charges that apply…

 

A 'Load' on top of the Exchange Rate (Debit and Credit Cards).

 

While exchange rates change daily, what you get always depends on the ‘Visa/Mastercard wholesale rate'. It's about the best exchange rate possible, as it reflects currencies' real interchange value.

 

This should mean more Euros, Dollars or Costa Rican Colons per pound, but unfortunately almost all cards secretly add a ‘load', an extra charge usually of 2.75%. So the higher the ‘load' the worse the exchange rate you get. This means £100 worth of Euro spending costs you £102.75. Worse still, it isn't broken down on statements so you won't notice .

 

Technically there are two types of loading on cards.

 

The Issuer Fee is the load Visa adds itself, which has a standard setting of 0% inside Europe and 1% for the rest of the world.

 

The Optional Fee is added by the card provider, as its cut of the currency conversion. This can be split and altered depending on each worldwide region.

 

Thus for a card which has a standard flat loading of 2.75% everywhere, the load is set at 2.75% within Europe and 1.75% outside. Whereas for a card (like Nationwide) which is 0% everywhere, it doesn't add an optional fee and absorbs the outside-Europe issuer fee within its own costs.

 

 

 

Cash Withdrawal Charges (Debit and Credit Cards)

 

Withdraw money from an overseas cash machine and the card provider will add a fee, usually around 2.5% of the amount withdrawn with a minimum of, around $2. Many people are aware of this charge for credit cards, but it's important to note it applies to most debit cards too.

 

Many overseas banks, especially in the USA, also charge an additional fee for withdrawing cash. Little can be done about this, except trying a few different banks to find the cheapest. Thus taking larger amounts out to cover a longer period is cheaper than lots of small withdrawals, though do ensure your cash is stored securely.

 

A Penalty for Spending (Debit Cards only).

 

Rather sadly, a few card providers have decided to take profiteering from holidaymakers up a level. Spend on a Halifax, IF, RBS, NatWest or Lloyds TSB debit card and you'll pay a fee each and every time, e.g. Halifax adds £1.50 per transaction.

 

This means that the normal ‘paying on the card's cheaper than making withdrawals' rule is defeated for these cards, so withdraw a large cash lump instead as it's cheaper. See the Holiday cards from hell section for more.

 

Unexpected Interest Charge (Credit Cards only).

 

Normally repay a credit card in full at the end of the month and you don't pay any interest. Yet withdraw cash and even if it's paid off in full, many providers still charge interest, often at a higher rate than spending e.g. Halifax's One card charges 9.9% for spending, but 23.9% for withdrawing cash.

 

While this isn't exclusive to withdrawing cash abroad, in the UK it's rarely noticed as credit card cash withdrawals aren't common. Those who don't pay off in full will, of course, always be charged interest.