Spend wisely: How to avoid hidden fees on your holiday spending
Holidaymakers are wasting £457million on hidden fees when using their credit card or taking money out with their debit card while abroad, according to new research.
The majority of credit, debit and prepaid cards charge customers when they're used abroad, often without warning.
One in ten people are unaware of the fees for spending on plastic while on holiday, according to a study by uSwitch.com.
The comparison website estimates that this summer, 21 per cent of holiday makers will risk charges by using their debit card to withdraw cash while they’re away.
But these fees can be avoided.
From cash to credit, debit or prepaid cards – there are many options to help avoid sneaky fees for spending abroad. We explain how.
It is essential that you do not leave organising your spending money until the last minute. If you do, you’ll get stung by poor rates and hefty commission fees at the airport. Or worse still, fork out for fees unnecessarily for spending on your credit or debit card.
The best way to get cash in advance is to order from online currency exchange specialists, such as ICE, FairFX, Travelex and Post Office. You will often have to order a minimum of £500 to avoid paying delivery charges. You can also order cash to pick up at the airport - this is often the cheapest way of getting cash for your holiday. Check the website of the airport you are travelling from to see what deals are available.
On the High Street, the Post Office and branches of M&S Money in Marks and Spencer both offer 0% commission and half decent rates.
Holiday: What fees to avoid
How you want to spend your money on holiday is entirely up to you, obviously. But there are some clever ways to avoid paying more if you organise yourself in advance. You may want to take some cash and then have the security of a debit or credit card for additional spending.
Another option is a prepaid card – there are dozens on the market but the best ones will not charge you to load cash, spend or withdraw money. These cards are similar to spending on a debit or credit card but you have to ‘load’ them up with money beforehand.
One advantage of using a prepaid card, as opposed to cash, is for a small fee (usually £10) most providers will replace the card with your funds intact.
However, there are some things to watch out for. Remember to check the exchange rate of the card against competitors to make sure you’re getting the most for you money.
Avoid cards which charge you for setting them up, making purchases, loading and withdrawing cash. Also remember to load the card with the correct currency, as using a card outside of the currency it was set up for use in, can be costly.
Firstly, you should only use a credit card for your holiday spending if you can afford to pay off the balance at the end of the month – otherwise you will start to accrue interest charges.
Spending on a credit card which is not designed for use abroad can mean that you’re slapped with hefty loading fees as well as poor rates of interest.
You have to beware of withdrawal fees of about £3 per transaction which are usually slapped with immediate interest on top.
However, there are some cards on the market which, as long as you pay your balance off each month, are suitable for use abroad:
- Halifax Clarity Credit card: No exchange rate or withdrawal fee and comparatively low average interest of 12.9 per cent. (From August, existing customers will be subject to a personal rate of interest plus the base rate.)
- Sainsbury’s Gold card: No loading or cash withdrawal fees and average APR of 9.94 per cent on spending and 20.1 per cent on cash. The card costs £5 a month but comes with Worldwide family travel insurance. Unlike the Halifax card you won’t be charged interest on withdrawals if you them off in full each month.
- Metro Bank personal credit card: No foreign usage fee and no cash withdrawals and an average APR of 13 per cent from the date of withdrawal.
- Santander Zero: No exchange rate fee or charges for withdrawing cash. The card is only available to Santander customers if your main current account has been with the bank for more than 3 months, paying in £1,000 a month, or if you have a mortgage or investment with Santander. Relatively high interest rate on cash advances at 27.9 per cent from date of withdrawal.
It is more tricky to avoid debit card charges while abroad as this will probably mean switching current accounts.
In the past Nationwide held the title for the best debit card to use abroad until, to the annoyance of customers, it cut the perk last year.
It now charges both 2 per cent commission and a £1 cash withdrawal fee on foreign transactions for its FlexAccount. Cunningly, this works out just slightly cheaper than many rivals. Qualifying account holders do now get free basic travel insurance in compensation of the erosion of the benefits on currency.
There are only two accounts which do not charge for using them abroad: Metro Bank, the first start-up bank to launch in the UK since the late 19th Century. It does not charge commission or withdrawals. It is without doubt the best debit card for spending abroad but as a branch-focused bank with a new and limited network, it's probably only worth opening an account if you live in or near London, for now.
There is also the Norwich & Peterborough's Gold Classic card that offers fee-free spending and ATM withdrawals while you're abroad. However, there is a £5 a month fee for the account, unless you pay £500 a month into your link account.
Read more: http://www.thisismoney.co.uk/money/cardsloans/article-2017661/How-avoid-holiday-money-fees-Best-prepaid-credit-cards.html#ixzz1TLiB9Guo