Holiday scamsBank charges

It's best to use a debit card when using an ATM abroad

Getting charged for withdrawing money from your bank account and purchasing goods abroad is not actually a scam, but can leave a feeling of being ripped off.

Why high bank charges?

Many of us are wondering how it can cost a bank that much more to process a debit transaction in Dublin compared to London, so we asked a number of high street banks why they charge customers to spend their own money abroad.

NatWest said: ‘People are using different banks and there is a cost involved in moving money between banks. There has always been a charge for being able to use debit cards abroad.’ 

Some cards are better than others when it comes to the charges they impose. Typically the charges, both for purchases and cash withdrawals on debit cards, range from between 1.5%-3%. 

In addition to this fee, a growing number of debit card providers also charge a flat fee on any purchases, e.g. Lloyds TSB charges £1 for an ‘overseas transaction fee’, while NatWest charges £1.25. 

Foreign exchange loading fees

In September 2007 we looked at 257 UK credit cards to check their foreign exchange loading fees - the amount that is added onto any purchases made abroad, and we found that 2.75% was the typical fee charged on each purchase transaction.

The best credit cards don't charge a foreign exchange loading fee

The best credit cards, none of which charge this fee, were Nationwide BS Gold Visa, Post Office Platinum MasterCard and Thomas Cook Visa. 

If you want to withdraw cash, however, all credit cards charge a cash-handling fee which is usually 2%, so it’s best to avoid using them to make withdrawals, both abroad and in the UK. If you do, you will also be charged a higher rate of interest from the day of the withdrawal.

It’s best to use a debit card if you must withdraw cash, the best one we found being the Nationwide Flex Account which doesn't charge a foreign exchange loading fee.

Benefits of using credit cards

Despite all the potential charges, it's advisable to use your credit card to make purchases abroad rather than your debit card since your credit card company is jointly liable on all purchases between £100 and £30,000, as long as the amount of credit does not exceed £25,000. 

And if you plan on using any cards while overseas, be sure to inform your bank of your travelling plans before you go. Some banks automatically put a stop on your card if unusual spending habits are observed. Warn them in advance to avoid being caught out.