Card charges: Take a break with a fee-free flexible friend

Fed up with paying a premium on credit or debit card payments overseas? Our guide to trumping the charges will help you beat the holiday blues.

With less than a week to go until school breaks up families will soon be off on summer holidays abroad. But if you want to avoid paying a premium while you are spending your holiday cash, now is the time to sort out your debt and credit cards because using the wrong type of card could significantly increase the cost of your overseas trip.

The average credit card whacks a hefty 2.75% to 3% ‘foreign usage charge’ when you use your plastic abroad. In addition, most credit cards charge 3% for cash withdrawals with a minimum fee of £3.

This means that the average additional charge for a £100 purchase abroad is £2.87 on a credit card, according to Defaqto that monitors financial products, or £3.06 on a debit card. If you withdraw cash from an automated teller machine (ATM) the charges rise to a hefty £5.60 for the average credit card withdrawal, or £3.96 with a debit card – just to access your own money in your bank account.

Fee free

But there are some cards that do not levy the foreign usage fee and some also waive the cash withdrawal fee too. Cards that do not currently charge a fee on cash withdrawals or a foreign exchange fee on overseas transactions include:

• Halifax’s Clarity Credit Card that also has the comparatively low interest charge for cash of 12.9% from the date debited to the cardholder’s account;
• Metro Bank Personal Credit Card also has no foreign usage fee and no charge for cash withdrawals – just an interest charge of 13% from the date of withdrawal;
• Sainsbury’s Gold Credit Card is another good deal with interest-free credit on purchases and cash advances if the cardholder repays the entire balance on time every month. It charges £5 per month but provides incentives that include free multi-trip family travel insurance;
• Santander Zero Credit Card does not levy a foreign usage fee or cash withdrawal fee, but it has a relatively high interest charge of 27.9% on cash advances from the date debited to the account.

Other cards worth considering because they have no foreign usage fee, although there may be a cash withdrawal fee, include the Post Office Credit Card, Saga Platinum Credit Card (only available to those aged 50 plus) and Sainsbury’s Gold Credit Card (it charges £5 per month but provides incentives that include free multi-trip family travel insurance).

If you are applying for a new card before you set off on holiday, get rid of ones you do not use any more because the card companies do not like to see people able to run up huge debts on a variety of different cards and they may otherwise turn you down.

Debit Cards

It is more difficult to avoid debit card charges because you will probably have to change banks to get a fee-free debit card on your current account. For most people it makes better sense to stick with credit cards when paying abroad. 

Ewan Edwards of Norwich & Peterborough Building Society, which has just gone global with its fee-free debit card, points out that using a debit card gives holidaymakers the added security of not having to carry around lots of cash. ‘It is also hassle-free for those who are travelling to more than one country and need to use different currencies. Some providers would charge almost £12 for the privilege of withdrawing £250 from an overseas ATM, and with other transactions this could easily increase to almost £70,’ he warns.

And in case you go over the top with your holiday spending, you could consider applying for the new Barclaycard Platinum card that has two years at 0% interest on a balance transfer – the longest interest free period of all balance transfer cards. This means you can pay off the holiday debts over a longer period. 

In addition, when customers apply for the card directly through Barclaycard.co.uk they will receive a discount of £20 off the 2.8% handling fee, if they transfer more than £3,000. That means a customer transferring £3,000 would effectively be paying a 2.1% fee. The Barclaycard Platinum card also offers 0% on purchases for the first three months and a typical annual percentage rate of 17.9% variable.