Debit card charges hit travellers before leaving UKWatch out if you’re buying foreign currency

28 May 2011

Hotel and beach

Your bank may charge extra if you use a debit card to buy foreign currency in the UK

Which? Money experts are warning holidaymakers that they could get hit with debit card charges when buying foreign currency from a bureau de change in the UK.

The Co-operative Bank is one of the worst offenders for imposing extra fees. If you pay for foreign currency by debit card, the Co-op will charge you an extra 2% (minimum £2 with no upper cap). And that’s on top of any commission charges imposed by the bureau de change itself. Barclays, Santander, NatWest, RBS and Lloyds TSB are not much better.

How can banks justify charging for debit card use in the UK?

Banks justify their fees through careful wording of their charging rules: rather than saying ‘We'll charge you for using your debit card overseas’ many banks instead say ‘We'll charge you for transactions in a foreign currency’.

How can I avoid paying extra debit card fees?

If you go to a UK cash machine to withdraw cash with your debit card and then use that money to pay for foreign currency, you won't pay any debit card fees. Additionally, if you pop into your local Post Office branch, ask if they can with withdraw cash using your debit card at the counter (which carries no charge) and then use that to buy your currency. You'll be limited, though, to how much cash you can withdraw from a cash point in any one day.

There are also some ‘good guys’ that don't charge you for using your debit card in the UK: First Direct, HSBC, Nationwide BS. Halifax/Bank of Scotland and Yorkshire Bank all impose no extra charge.

And if you're looking for an all-round good-value bank account for overseas use, Norwich & Peterborough BS (N&P) does not charge you for buying foreign currency in the UK, nor does it charge for cash withdrawals or purchases overseas. You should take an extra emergency card with you though, as N&P won't get a replacement card to you abroad if yours is lost or stolen. Yorkshire Bank, Co-operative bank, RBS/NatWest and Santander won't either.

Banks making a profit from loyal current account customers

Which? principal researcher Martyn Saville commented: ‘You'd expect to pay extra fees for paying by credit card – cash withdrawals on credit cards are notoriously expensive, with most imposing transaction fees, APRs of around 30% and no interest-free period. But you wouldn't expect this of a debit card.

'And yet, pop down to the Post Office, Marks & Spencer or your local bureau de change to buy some currency before you go on holiday and it’s likely you'll get stung by your bank for debit card charges. Buy something online in a foreign currency and the same will probably happen.

'If some banks can still make a profit without hitting their loyal current account customers with sneaky charges, why can't the others?'

For more details of the best ways to buy foreign currency and the best credit, debit and prepaid cards to take with you, read the Which? guide to Travel Money.

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