Don’t waste you holiday money on credit card fees!

30th May 2012  

A report in a national newspaper has suggested that British holidaymakers are wasting more than £500million a year of their hard-earned holiday money on credit card fees. The holiday season is almost upon us and a great Pound/Euro exchange rate is making a last-minute flight to Spain seem very tempting. But The Mirror has suggested that simply by taking the wrong type of credit card abroad, British holidaymakers are wasting anything between £10 to £50 of their spending money.

The catch comes with the inclusion of ‘foreign currency surcharge fees’ for transactions abroad, and that’s for both cash withdrawals and purchases. For the majority of cards the rates range from between 2.75% to 2.99% of the amount spent. However, by shopping around and checking before you head off abroad, you can find cards that offer a better deal. We feature a selection of overseas credit cards all with no foreign exchange surcharges, or with promotional offers that give your reduced fees.

The costs really start mounting up when you make cash withdrawals from cash-points or ATMs, where you may also incur an additional 3% cash transaction charge. So a withdrawal of £100 worth of Euros could cost you an additional £6. This may not seem like much initially, but include foreign usage fees for those restaurant meals, excursion tickets and other indulgences and you can see how using the wrong card could quickly cost you much more than you thought. And don’t think switching to a debit card rather than a credit card will help you avoid the charges either – debit cards are still subject to fees and cash transaction charges that can still make a considerable dent in your holiday funds.

What are the alternatives?

While the ease and practicality of credit and debit cards may outweigh the inconvenience of additional charges for some people, there are alternatives. Prepaid currency cards (a selection are included on our overseas cards page) are one option that’s worth considering, and have the added security advantage of being totally separate from your bank account. So if you do lose one, your personal details remain safeguarded against identity theft or hacking. Prepaid currency cards are chip and PIN secure and accepted just about everywhere. Prepaid cards are like pay-as-you-go mobile phones, and don’t require a credit check. (You may need to go through a verification process with the card issuer before you leave the UK if you want to use a prepaid card for hiring a car.)

You can choose from Sterling prepaid or a single currency prepaid card in Euros or dollars. Some suppliers will also supply them in other currencies. With single currency cards, you also benefit from a fixed exchange rate, as the transfer is carried out before you leave, using the current exchange rate at that time. This means that even if the exchange rate goes down while you’re on holiday, you won’t lose any money, and you can shop around for the best exchange rate deal before you go.

The other advantage of a prepaid currency card is that it removes the temptation to overspend on holiday, allowing you to budget carefully and avoiding those nasty ‘shock’ credit card bills when you get home.

Finally, if you are traveling to Europe you have the option of taking out some hard cash before you go, but do check around for the best exchange rates first. While credit cards may still offer a great ‘emergency’ back-up fund when we’re abroad, you can save yourself a considerable amount of money by exploring other options when it comes to your holiday money. Of course, you can always take the credit card with you as well…just in case!

(We recommend you also read our comprehensive guide to staying out of trouble with your credit card abroad.)

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