Don't Get Burnt with Unnecessary Foreign Credit Card Usage Fees this Summer
Personal_Finance / Credit Cards & Scoring Jul 12, 2007 - 09:16 AMBy: Nationwide
Nationwide reveals holidaymaker's lost £326 million last year : With summer holidays around the corner, millions of holidaymaker's are planning to travel abroad. Despite shopping for the best holiday deal, many people overlook the foreign usage charges imposed by their card provider. Nationwide estimates that travelers wasted over £326 million* in unnecessary foreign loading fees on their credit card whilst abroad last year. The Society therefore urges consumers to pay as much attention when selecting the card they take abroad, as they do in choosing the perfect holiday destination.
Some organisation's have actually increased their foreign usage charges this year to further benefit from their customers’ holiday spending. For example, Lloyds TSB have just announced it is increasing the charge on its debit card from 2.75% to 2.99% and Halifax is reported to be increasing the charge on its credit card from 2.75% to 2.95%**. Nat West has increased the charges on its debit card from 2.65% to 2.75% every time a purchase or withdrawal is made overseas and has increased its flat purchase fee from 75p to £1.25. Consumers should take a good look at the deal their bank is offering when traveling abroad and if necessary vote with their feet by moving to a card that doesn’t penalise them whilst they are on holiday.
Amongst the issues facing travellers are:
Foreign Loading Fees
Most lenders charge a loading fee of around 2.75% when spending abroad and most levy a flat fee each time a debit card is used as well. For example, Halifax charge £1.50 for every purchase on top of the 2.75% foreign loading fee on their debit cards. Nationwide is the only high street financial provider to offer free use abroad for all of its customers, saving them millions of pounds each year.***
Dynamic Currency Conversion
When abroad the Society recommends that holidaymakers should be aware that the rate of exchange offered by the retailer may not be as competitive as waiting for their provider to make the conversion, in order to get the best exchange rate and no commission charges.# Nationwide estimates that last year its customers wasted over £850,000## by choosing to pay in sterling on their credit card whilst abroad. The Society therefore advises all of its customers to always pay in the local currency.
Jeremy Wood, divisional director at Nationwide, said: “People who are planning to go abroad over the next few months should be aware of the hidden charges that most card providers impose which are both costly and unnecessary. Anyone using a Nationwide debit card or credit card will not be charged any foreign usage fees and will therefore have a little more money to help them enjoy their holiday.”
For further information:
Rachel Shephard, press officer, telephone: 01793 657225
Steve Blore, senior manager, telephone: 01793 655199
Notes :
Nationwide does not levy any foreign usage charges on its debit or credit card, but it is important to note that anyone using their credit card to withdraw money from an ATM at home or abroad will be charged a cash advance fee.
* £326 million estimate for money wasted in unnecessary foreign loading based on:
- UK credit card issuers processed £12.3 billion worth of overseas transactions in 2006. (source: APACS).
- Nationwide transactions represented £439 million of this overseas spend.
- Assuming an average 2.75% loading fee, total loading fees applied on other issuers overseas spend (£12,300 million - £439 million = £11,861 million) was £326.2 million (2.75% * £11,861 million = £326.2 million).
** Source of Halifax Data – Daily Mail, 11 July 2007. Date of new rates to be confirmed.
*** Last summer, Nationwide credit card customers alone were around £3.4 million better off for choosing one its cards over another provider.
Nationwide customer saving of £3.4 million based on:
- Nationwide customers spent £122 million on foreign currency transactions last summer (June 06 – August 06).
- Nationwide do not apply a foreign loading on these transactions. Typical loading applied by UK financial institutions is 2.75%.
- Saving to Nationwide customers is £3.4 million (2.75% * £122 million = £3.4 million).
#DCC
- Cardholders who bank elsewhere face a complicated scenario. For certain transactions it may be less expensive for them to pay in sterling. They would have to know what their bank charges for foreign usage and currency conversion. In addition, they would have to find out the VISA rate for that day and compare this to the sterling rate being offered by the retailer.
- If the cardholder opts to pay in sterling the payment will be converted from the local currency to sterling. Payment in sterling prevents Nationwide from handling the currency conversion via VISA on our customer’s behalf. For regulatory and anti-competitive reasons VISA is unable to prevent the operation of DCC by retailers or ATM providers but has introduced rules to govern it. Prior to the transaction, a shop or restaurant offering the service should verbally inform the cardholder of the payment choice available, but language barriers will often prevent this. This should be followed by a statement on the signature slip illustrating the choice the cardholder has made.
- Nationwide can only state the VISA positioning as we do not issue Mastercard branded Debit or Credit Cards.
## £850,000 wasted by choosing to pay in sterling based on:
- Volume of Nationwide credit card holder transactions performed overseas in Pound Sterling was over £31 million in 2006.
- Nationwide believes the exchange rates used by merchants offering to convert local currencies into Pound Sterling will represent worse value than the 2.75% loading applied by other card issuers. 2.75% of £31 million worth of transactions equates to £852,500.
Cost of various purchases with a debit card overseas-Assuming all ATM transactions and purchases are single transactions.
| Debit Cards | Nationwide | NatWest | HSBC ***** | Lloyds TSB (from 30/07/2007) | Barclays | Halifax |
|---|---|---|---|---|---|---|
| ATM charges | Free | 2.75% + 2.00% (min £2, max £5) | 2.75% + 1.5% (min £1.75) | 2.99% + 1.5% (min £2.00, max £4.50) | 2.75% + 2% (min £1.50, max £4.50) | 2.75% + £1.50 |
| Retail purchases | Free | 2.75% + £1.25 | 2.75% | 2.99% + £1 | 2.75% | 2.75% + £1.50 |
| £100 ATM withdrawals | Free | £4.75 | £4.50 | £4.99 | £4.75 | £4.25 |
| New clothes (£50)**** | Free | £2.63 | £1.38 | £2.50 | £1.38 | £2.88 |
| Train tickets (£150) **** | Free | £5.38 | £4.13 | £5.49 | £4.13 | £5.63 |
| Restaurant (£120) **** | Free | £4.55 | £3.30 | £4.59 | £3.30 | £4.80 |
| Food shopping (£100) **** | Free | £4.00 | £2.75 | £3.99 | £2.75 | £4.25 |
| General travel (£400) **** | Free | £12.25 | £11.00 | £12.96 | £11.00 | £12.50 |
| Other (£180) **** | Free | £6.20 | £4.95 | £6.38 | £4.95 | £6.45 |
| Total | Free | £39.76 | £32.01 | £40.90 | £32.26 | £40.76 |
**** NatWest charge customers £1.25 per retail transaction, Lloyds TSB charges £1 per transaction and Halifax charges £1.50 per transaction. These charges are in addition to the foreign currency loading fees.
***** On HSBC’s Bank Account Plus and Premier Accounts the 1.5% (min £1.75) for cash transactions is not charged.
Source of Competitor Data – Moneyfacts.co.uk - the money search engine 10 July 2007.
Source of Calculations – Nationwide, 12 July 2007.
Cost of purchases with a classic credit card overseas-Assuming all ATM transactions and purchases are single transactions.
| Credit Cards | Nationwide | NatWest | HSBC | Lloyds TSB | Barclaycard | Halifax** |
|---|---|---|---|---|---|---|
| ATM charges | 2% (£2 min) | 2.75% + 2.5% (£2.50 min) | 2.75% + 2.5% (£2.50 min) | 2.75% + 2.5% (£2.50 min) | 2.75% + 2.5% (£2.50 min) | 2.95% + 3% (£3 min) date of new rates to be confirmed |
| Retail foreign currency loading fee | Free | 2.75% | 2.75% | 2.75% | 2.75% | 2.95% |
| £100 ATM withdrawal | £2.00 | £5.25 | £5.25 | £5.25 | £5.25 | £5.95 |
| £1,000 retail spend | Free | £27.50 | £27.50 | £27.50 | £27.50 | £29.50 |
| Total | £2.00 | £32.75 | £32.75 | £32.75 | £32.75 | £35.45 |
Source of Competitor Data (except Halifax) – Moneyfacts.co.uk – the money search engine 10 July 2007.
Source of Calculations – Nationwide, 12 July 2007.
**Source of Halifax Data – Daily Mail, 11 July 2007. Date of new rates to be confirmed.
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