As the long-awaited bank holiday weekend approaches, millions of Easter holidaymakers are being cautioned against making a costly credit card mistake. It’s important to be aware that using your card in another country could result in foreign exchange fees and cash withdrawal charges. These charges can quickly add up, so it’s crucial to choose your card wisely.
The Impact of Credit Card Charges
Credit card charges vary from provider to provider and card to card, but they can accumulate rapidly. There are typically two types of charges: set cash withdrawal fees and non-sterling fees. To ensure that you don’t end up paying more than necessary, it is essential to select the right credit card for your overseas travels.
Research conducted by TotallyMoney revealed the costs associated with using popular credit cards to withdraw cash when traveling. Even though these charges may seem minimal compared to your overall expenses, they can add up significantly, especially when making multiple smaller transactions. For instance, withdrawing £20 to treat your family to ice creams and drinks on the way to the beach could cost you nearly £5 in fees alone.
Andrew Hagger, a personal finance expert and founder of Moneycomms, advises against using credit cards to withdraw cash at ATMs overseas. He suggests considering fee-free credit cards or low-cost debit cards as alternatives to avoid losing a significant portion of your holiday budget due to cash withdrawal and non-sterling charges.
The Cost of Cash Withdrawals
TotallyMoney’s research also unveiled the varying charges imposed by different providers for cash withdrawals. For a £20 withdrawal, Aqua and Fluid charge an exorbitant £4.59 in fees, equivalent to a 22.95% charge. On the other hand, MBNA and Lloyds charge a comparatively lower fee of £1.59, which is around 7.95%.
For larger transactions, the representative charges decrease slightly but still accumulate over time. Aqua and Fluid customers withdrawing £50 pay a total of £5.47, equivalent to a 10.94% charge. Meanwhile, MBNA and Lloyds customers are charged £3.97, accounting for a 7.94% fee. Virgin Money’s customers face the highest charges for withdrawing £100 at a time, with a fee of £7.99 (7.99% effectively), while NatWest cardholders enjoy the lowest charge of £5.75 (5.75%).
How to Save Money on Your Holiday
In addition to being cautious about credit card charges, there are other ways to save money while on holiday. Consider the following tips:
Buy Currency Ahead of Time
Purchasing foreign currency ahead of your travels allows you to search for the best rates. Avoid buying cash at the airport on the day of your trip, as the exchange rates are typically around 20% higher than normal. Don’t leave yourself rushing to the currency counter at the airport at the last minute.
Use Comparison Sites
Compare travel money companies to find the best rates and potential fees you might have to pay. Even if you’ve left it until the last minute, you may still be able to order online and collect the currency at the airport. MoneySavingExpert’s TravelMoneyMax is a useful comparison website that allows you to compare pick-up and pre-order rates.
Use Your Credit Card Wisely
Using your credit card abroad can result in cash withdrawal or sterling fees, and you may also be charged a higher interest rate if you don’t pay off the bill each month. If possible, try to avoid using your credit card abroad unless it offers good exchange rates for foreign travel. If you do plan on using your credit card, make sure to check the fees stated in the terms and conditions to avoid any surprises later on.
Consider Prepaid Cards
If you’re concerned about safety and want to use a card instead of cash, consider topping up a prepaid card to lock in the current exchange rate. Alternatively, opt for a debit card that offers favorable rates and doesn’t charge fees.
Specialist Cards for Foreign Currency
There are several specialist cards available that offer great exchange rates. These include travel credit cards and prepaid cards, both of which allow you to pay abroad without fees or at a fixed exchange rate.
Travel credit cards, such as Halifax’s Clarity Card, don’t charge for overseas usage or cash withdrawals. However, interest is charged on any balance that isn’t fully repaid at a rate of 19.9%. Make sure to pay off your balance before the end of the month to avoid interest charges.
Prepaid cards are another option for carrying money abroad. These cards allow you to load a set amount of cash at a fixed exchange rate. Be sure to read the terms and conditions carefully, as some prepaid cards may have hidden costs and charges.
Remember, it’s always wise to thoroughly research and compare your options before making any financial decisions for your holiday.
For more information on holiday spending and other related topics, visit F5mag.com.
Source: The Sun