Is your bank cashing-in on your holiday?
With a multitude of different fees charged by credit and debit card providers it’s hard to track how much you’re paying to use your card abroad. Unfortunately, some banks are charging far too much.
When we go on holiday we often push the thought of debit card charges to the back of our minds. After all, when you’re on holiday the last thing you want to do is worry about what your bank is charging you for every transaction.
And then there’s the exchange rate – are you getting a good deal or paying through the nose?
The truth is it all adds up – and to perhaps more than you think.
Which banks are charging the most?
When I checked the rates charged by all the major debit card providers on the market I was surprised by the variety of fees that they can apply on purchases and withdrawals.
The banks making the most out of holidaymakers are NatWest/RBS, Halifax/Bank of Scotland, Santander and Lloyds TSB. All of these charge a foreign loading fee of 2.75% or 2.99% on every transaction, as well as transaction fees for making purchases and cash withdrawals.
When factoring in all the fees, the amount you’re charged quickly adds up. For example, if you made ten £20 purchases and five £50 cash withdrawals abroad (a total of £700) you would be charged £34.88 by Halifax, Bank of Scotland, Natwest and RBS.
Is it possible to avoid the fees?
The good news is that there are some decent products that could save you money on overseas charges. Norwich and Peterborough BS (N&P) and Metro Bank charge no overseas fees on their current accounts. Nationwide BS offers the next best deal, charging a 2% foreign loading fee and £1 per cash withdrawal.
Alternatively you could opt for a good credit card that charges no foreign loading fees. There are also some good euro and dollar prepaid cards that will charge 0% foreign loading and no fees on purchases.
If N&P, Metro and, to a lesser degree Nationwide BS, can manage to absorb the overseas fees, why can’t the rest? And why is it so complicated? Far too often, not only do you have to pay a percentage of your overseas spending in fees, they then whack a per-transaction cost on top, penalising people who prefer not to carry large amounts of cash around with them.
How much does your bank charge you to use your card abroad? How do you avoid it, or are you happy to pay a bit extra when you’re on your hols?
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L.M.High
I used to pay the tollgates in France with my card (much easier than searching for spare cash) but now Santander has taken over Alliance & Leicester, for a 2.80 euro tollgate charge the cost is 50% over at exchange rate of £2.53 + int.use fee of £0.07+ transaction fee £1.25 !! Multiply that five or six times on a journey in one day and it becomes outrageous.
Ironically their statements urge one to “use your card for everyday items” and “use your card abroad”!
Very good for their profits! Ha!
David
There’s nothing worse than getting your bank statement after a holiday and seeing the extortionate charges. Like the above commentator I have ended up banking with Santander having switched to Alliance & Leicester several years ago. Imagine my disgust at returning from a holiday in Spain to find my Spanish bank has charged me for using their services. It would be interesting to see what the real cost is to these multi-national corporations when using a card or ATM abroad. Is this the next large scale fee scandal?
Nigel Whitfield
I have the firstdirectory option on my account, which gives me free cash withdrawals abroad, as well as travel insurance, etc. Sure, it’s about £12 a month, but at least I get a benefit.
When you have to pay each time you take money out, you end up taking more – at least I did. So I’d take 150 or 200 euro at a time, because that way the charge was easier to stomach as a percentage. Then I’d have loads of euros left at the end of a trip, doing nothing – especially annoying as I have an offset mortage.
Being able to take money out without paying a penalty means I can take what I need, and not worry about having excess foreign currency left.
Of course, if other banks can absorb the cost, you can’t help wondering why FD doesn’t too, for everyone, but at least you get other benefits with firstdirectory
Ann Maureen Fearon
After reading your article on unfair card charges I agree that this practice is unacceptable. We have travelled on holidays with Saga for many years and last year we took their “World in One Country” holiday, the basic price being £5,500. At that time we were told that if we pay by credit card, due to “CHARGES IMPOSED ON US”, they would have to add a transaction fee of 1% if we paid with with a Saga Credit card and 2.5% for all other credit cards. This year I see in their brochures that payments paid by credit card are subject to a transaction fee of 2.5% (or 1% if paid by Saga PLATINUM card.) I wonder why the difference in card usage!!!? The thought did cross my mind to walk into their office and pay for the holiday in cash! They even charge £3 for a payment by cheque. In the end we used a debit card. If my calculations are correct, had we paid by a credit card other than a Saga one, we could have ended up paying an extra £137.50, which is quite a lot extra to us as retired folk on a fixed income. Totally unacceptable, and this year I cannot yet bring myself to book one of their holidays despite being inundated every few days with their brochues.
Bill
I use a no conversion fee credit card that also gives cashback for my purchases abroad.
You still need cash though and it is more difficult to get no conversion fees, no withdrawal charges and also the current conversion rate (forexrate).
Citi provide two very useful accounts – one Euro, the other Dollar – no fees, good conversion rates, cheque book in Dollars and plenty of free ATM use:
http://www.citibank.co.uk/personal/banking/international/eurocurrent.htm?merchant=citi
Saibal De
I recently had an extremely unpleasant surprise when I visited India on my annual winter trip there. I already had an ICICI bank account at the East Ham (London) branch, one of the main reasons being that they promised there were absolutely no charges for withdrawing cash at cashpoints in India. However, when I made a cash withdrawal on at least 2 occasions I noticed that the exchange rate I calculated from that day’s balance available in rupees (I already knew exactly how much I had in pounds in the account) was significantly different from the rate that I calculated from the value of the cash withdrawal at the same instant. The local cashpoints did not make any references to any fees, either on screen ( as in the UK) or on any of the extensive notices available in the booth.
I used to draw foreign cash through my Nationwide flex card up until they introduced loading fees (3%) plus a withdrawal charge of £1 per transaction in the summer of 2009. However, when I checked the exchange rates that Nationwide were offering me AFTER the fees quoted upfront, I discovered that ICICI was giving a marginally LOWER exchange than this, despite claiming no charges! It transpired that their hidden charges, in the margin they kept on the exchange rate, amounted to around 5%!
If I thought that was bad, there was more horror in store. During this trip, I opened a local ICICI account in the Calcutta branch. The bankers were falling over themselves to get my custom, fawning in a most obsequious (and to my western sensibilities, most unacceptable) way, which was only to be expected as NRIs (Non-Resident Indians) are treated just next to God in India, for the power, wealth and prestige we are perceived to bring. They pretty much opened my account in the comfort of my home there, giving me all the paperwork, including online details, debit card and PIN, and an additional card for my mum who lives there. (They even lied to me point blank in their desperation to get me to open a fixed deposit account while I was there–I resisted this determinedly, and not unwisely–but that is another story!) Not once did they state that there would be a charge for any of this. More importantly, neither did their website–on the contrary, it stated categorically that there were no charges for ATM transactions. This made sense, after all, it was labelled an international debit card and foreigners would be using it abroad. I deposited a cheque drawn on my London ICICI bank, which took a while to clear, by which time I was back home in London. On checking the balance at my local Sainsbury’s Bank cashpoint I was puzzled to notice that the amount on the slip–although it confirmed that the cheque had cleared–was quite different to that which came out on the printout slip seconds afterwards. To be sure my eyes were not deceiving me, I checked it 4 times in a row, and each time the discrepancy was obvious. Now I’m aware that exchange rates fluctuate, but surely not by so much in the course of barely a second or two!
Imagine my shock, when I came home, decided to check my balance online, and discovered that I had been charged 28 rupees (about 40 pence) on each of the 4 occasions I had checked the balance! I immediately shot off an email of complaint to Calcutta. Customer services in India is the pits, and this proved no exception, After much unnecessary and most annoying waffle, they quoted me their so-called charges, of 28 rupees for balance checking and 118 rupees (about £1.50) per cash withdrawal transaction! This seemed quite arbitrary, as there was absolutely no evidence either in their own literature, or in my numerous personal dealings with them, that such charges existed.
There’s more. I then discovered through a friend that there was a 300 rupee annual fee (about £5) levied on the debit card as well as the supplementary card, and every cash transaction–even in India–cost 150 rupees ( about £2.50)!!!
Now I’m wise to their double-dealings and sneaky hidden charges, I shall no longer be doing any business with this monstrously unjustifiable excuse for a bank. The lack of transparency and the way they intentionally mislead customers in order to get their commission is absolutely staggering, and actually makes UK banks look like Mother Teresa.
Moral of the story–when banks have the audacity to treat their customers so cynically, charging merely for for the privilege of looking to see how much money we have, and for drawing on our own savings, something is very wrong indeed, and it is time to vote with our feet. Let us go where we are not held in such contempt.
Saibal De
Regarding my earlier comments above, in the 3rd paragraph, I meant the discrepancy between the screen balance and that on the slip–sorry for any confusion!
Edward Crooks
I have my current account with Nationwide. They are barred from selling foreign currency because of the rules about what building societies can and can’t do. However, they claim that they can charge me for withdrawing cash from cash machines while abroad. It seems I can purchase something using my debit card without charge but if I take money from my account I incur a charge.
Can you help me sort this out please?
The actual exchange between myself and NW is to be found below, if you wish to read it. (To reduce the length of this exchange I have removed the standard text about what to do next if I am still not happy with the situation)
Thank you,
Edward Crooks
Subject:Re: 1 – Application queries – FlexAccount – None of the above <>
Date: 01/02/12 10:24
Unique Tracking Number:5473786
Log Reference Number 2235531
Dear Mr Crooks,
Thank you for your message.
I am sorry to learn that you remain unhappy with my previous response and thank you for giving me another opportunity to review your concerns.
Firstly, please accept my sincere apologies for the delay in responding to your complaint.
Nationwide do not offer a Bureau de Change service for foreign currency in our branches. Previously customers were able to order foreign currency with us through a third party but this was only for conversion from sterling.
Overseas charges came into affect as of 1 November 2010, we notified all customers prior to this policy change in August 2010.
If you carry out a transaction using your card in a currency other than sterling, it will be converted to sterling on the day the transaction is processed by our card scheme providers at a wholesale rate of exchange, which may vary daily. For an indication of that exchange rate, you can see the Visa wholesale rate of exchange at http://www.visaeurope.com/fxcalculator. This is an “indication” because transactions are processed when the retailer passes them on to the scheme provider, which is generally not on the same day the transaction took place.
There is a commission charge and a cash withdrawal charge for transactions in currencies other than sterling. You will be charged the charges shown in the table below (No table was included) when you use your card for transactions in currencies other than sterling. These include all charges that we have to pay to other organisations on your behalf.
We take both the commission charge and the non-UK cash withdrawal charge from your account on the day the transaction is shown on your account. This may not be the same day you carried out the transaction.
We incur additional fees for cash withdrawals abroad. The cash withdrawal fee covers the charges that we incur on your behalf.
The charges are legal and inline with our FlexAccount terms and conditions. I regret to inform you I am unable to issue a refund of the charges incurred.
In December 2011, within the news there was information surrounding an Office of Fair Trading investigation. It affects some banks- Lloyds, Barclays, RBS, Santander and the Co-op.
The news is about how foreign charges are made to accounts and how they show on statements.
Nationwide already follows the “best practice” that the Office of Fair Trading have suggested. The move comes after pressure from the Office of Fair Trading. Banks and credit card companies have agreed to scrap some charges they levy on holiday makers buying foreign currency. Five companies – Lloyds, Barclays, RBS, Santander and the Co-op – impose charges of between 1.5 and 2% if customers use their debit cards before leaving the UK to buy foreign currency.
They have agreed to scrap this charge. Consumer Focus estimates that this will save consumers £20m a year. Nationwide, HSBC, First Direct and Halifax Bank of Scotland do not charge such a fee.
Banks and card companies will also show separately on statements those charges which are incurred overseas, including the typical “loading fee” of nearly 3%, rather than hiding them in the cost of the items travellers have bought.
Lloyds Banking Group, including HBOS, HSBC, Co-op, Capital One, RBS and NatWest – for credit card statements, and American Express have agreed to implement this change by the end of 2013.
Nationwide, Barclays, Santander, RBS and NatWest – for debit cards only – already provide this information.
Kind Regards
Kimberley Watts
Senior Customer Consultant
http://www.nationwide.co.uk
— Original Message —
From:
Received: 10/01/12 16:46:46 o’clock GMT
To:
Subject: Re: 1 – Application queries – FlexAccount – None of the above
Thank you for your response. However, you have done nothing more than re-hash previous replies without answering my main points.
I am not going to repeat what I wrote earlier, but I will keep pressing for a proper answer on the legality of your charges for this service.
Will continue to hear from me until you respond properly.
Edward Crooks
——————— Original Message ———————
Unique Tracking Number: 5473786
Log Reference Number 2235531
Dear Mr Crooks,
Thank you for your message.
You may remember we replied to you on 21 December 2011 promising to look into the difficulties you experienced with overseas commission charges. I am sorry you have had to raise these concerns and thank you for giving me the opportunity to investigate these for you.
Firstly, please accept my sincere apologies for the delay in responding to your complaint.
We made every effort to communicate the changes with our customers including a press release, changes to our website and individual letters sent in August to all of our FlexAccount customers. To confirm, as of 1 November 2010 all foreign transactions incur a 2% commission charge and cash withdrawals incur a 2% commission charge plus a £1.00 withdrawal fee.
Although there is a charge being passed on to customers for purchases and withdrawals on any transaction other than sterling, Nationwide still pay a fee for each transaction and withdrawal. Nationwide are charged 2.75% per transaction and pass 2% on to the customer, we still pay 0.75% each occasion.
Whilst I sympathise with your position, I regret that I am unable to offer you a refund for any commission charges incurred as a result of this policy change, in line with our terms and conditions.
Kind Regards
Kimberley Watts
Senior Customer Consultant
http://www.nationwide.co.uk
— Original Message —
From:
Received: 15/12/11 19:39:12 o’clock GMT
To:
Subject: Re: 1 – Application queries – FlexAccount – None of the above
Dear Shellon Islip,
Thank you for your response.
However, the equitable argument is not valid. Each individual member of the NWBS has their own needs, which change over time.
If you cannot DEAL in currency transaction, you surely cannot charge for currency transaction – that must at least be unethical, at most, illegal.
My comment on you suffering no more cost for withdrawals at home and abroad still stands.
The comment you use to justify your charges that you are cheaper than your competitors confirms my suspicion that you are jumping on the band-waggon.
It is unfortunate that you cannot see that this action is not what a NWBS member would expect from a mutual organisation.
Please let me have my money back – and stop doing it!
Edward Crooks
——————— Original Message ———————
Unique Tracking Number: 5473786
Dear Mr Crooks,
Thank you for your message.
I am sorry you are not happy with the non UK commission charges incurred on your account while making transactions and cash withdrawals abroad. We do appreciate your loyalty to Nationwide and are constantly striving to find the best possible ways to deliver real value to our members. Commission free card use abroad has been a long standing benefit of Nationwide’s FlexAccount but, even though it has been available for more than ten years, only around a third of our current account holders have used it each year. Over time we have found it has provided a huge benefit to a tiny minority of our current account members, such as regular business travellers. At the same time it has benefited others by only a modest amount and it has not benefited the majority of our current account members at all. It is simply not an equitable way to share member value. However, the majority can benefit from free travel insurance if they make FlexAccount their main account and the value they would receive will be shared more equitably.
We have a responsibility to manage the business in the most prudent and sustainable way for our membership as a whole and a key part of our corporate strategy is to encourage more members to use their FlexAccount as their main current account. We believe the free multi-trip travel insurance is more likely to encourage people to use their FlexAccount as their main account, particularly as it covers holidays booked in the UK as well as in the rest of Europe.
The introduction of 2% commission for debit card use abroad and the £1 cash withdrawal fee also have to be seen in the context of the charges made by our competitors. Nationwide’s charges are still lower than those made by the majority of our high street competitors.
I do understand your concerns and I acknowledge that you are not alone in really appreciating the previous arrangements. I have tried to give you the fullest possible explanation of the rationale behind the changes. We did not take this step lightly, but we have to put in place benefits that are more equitable, prudent and sustainable.
If you have any further queries, please reply to this message.
Regards,
Shellon Islip
Customer Consultant
Internet Services
— Original Message —
From:
Received: 15/12/11 14:13:10 o’clock GMT
To:
Subject: Re: 1 – Application queries – FlexAccount – None of the above
Thank you for your reply.
If you can’t handle foreign money how can you justify charging me a non-UK commission fee or interest on cash taken from my account while I am out of the country. Yes, I know it is one of your new rules, but it is based on something Nationwide BS cannot do! For years I have been taking money from my account while abroad. It costs you no more than it does when I to take money from my account while I am in the UK, so why make any kind of charge. I think you have seen other banks rip-off their customers when engaging in these transactions and decided there was something here for you. Sad, sad, sad!
Please let me have my money back – and stop doing it!
Edward Crooks
——————— Original Message ———————
Unique Tracking Number: 5473786
Dear Mr Crooks,
Thank you for your message.
I apologise we do not currently offer the facility to exchange money as we are a UK only based Building Society so do not handle foreign currency.
I would like to thank you for contacting us. If you need anything else please reply to this message.
Kind Regards,
Heidi Brown-Brickell
Customer Consultant
http://www.nationwide.co.uk
Nationwide
— Original Message —
From:
Received: 14/12/11 11:30:53 o’clock GMT
To:
Subject: 1 – Application queries – FlexAccount – None of the above
I withdrew more EUROs than I needed while I was in Berlin recently. Can I call in to my local branch to change them for GBP?
MoWanderlust
Use a Sainsbury Gold Card. Granted it is £5 a month but pays for it self if you go away twice a year. No fees whatsoever on cash withdrawals or card purchases home and abroad. You also get free travel insurance and a few other benefits but me the cash withdrawal benefit is more than enough. No need to carry travellers cheques or cash. Arrive at destination airport find a cash machine and away you go.
keith
Got a surprise with my LLOYDS TSB Premier Duo Avios Card the other day when after booking a hotel in New York was charged nearly 3% Transaction Fee .Phoned to complain and was told we have always charged it but until October last year we used to hide it in the charge so you did not know !!!.They could not tell me where the charge is covered in the TERMS .After 25 years will be leaving LLoyds and finding an honest bank and incidentally using my other cards which do not make such a charge .Will also be posting comments about LLoyds practices for the next 25 years god willing !
Kai
In my experience, Capital One credit card used to bury the 3 percent foreign charge inside the total transaction amount in previous years. Starting from 2012 onwards, they have split out the basic transaction amount, and the transaction charges separately on the statement, so all gets revealed.
Funnily enough, after the charges, I found myself slightly better off in the end, as Capital One’s exchange rate was consistently better than what I could find on the high street in Hong Kong!!