The Hidden Cost Of Using Your
Credit Card Abroad
thought that you were being wise and saving your hard earned
cash by using credit cards for your holiday abroad, think again,
warns the Saga Group. Between the merchants and the credit card
companies, your overseas purchases could cost you as much as 5%
more if you use the wrong credit card.
The culprit? All the little - and not so little - fees and
charges for transaction fees, loading charges and currency
exchange fees that credit card companies and banks add onto your
purchases when you use their plastic abroad. Those fees will add
up to nearly $1,214M this year, according to uSwitch, the online
comparison service. It is possible to avoid contributing to that
amount, though, if you take the time to compare credit card
agreements before you go abroad and choose the best credit card
to take with you. It's not always easy to find the right credit
card finance experts say, because many of those fees and charges
are 'hidden' behind not so transparent terminology. Here are
some of the things to look for when choosing which credit card
travelers should tuck into their wallet when they go abroad.
Loading fees are charged by the issuer of your credit card when
you use it to purchase something or withdraw cash overseas. It
could be labeled a 'exchange rate administration fee' or a
'exchange rate adjustment charge', and may be as high as 2.75%.
That fee is nominally a currency exchange fee, charged for
exchanging the purchase from the local currency to your own. If
2.75% doesn't sound like much, look at it this way - if you
purchase $2,000 worth of goods on your credit card, it will cost
you an extra $55.00 just for that one fee.
Transaction fees are typically charged on cash withdrawals
overseas using your credit or debit card. That's likely to hit
your pocket for another 1.5-2% of the amount of money that you
withdraw from your account.
Currency conversion charges are often rolled into the loading
fee described above even if you opt to use dynamic currency
conversion and pay for your goods in the local currency rather
than your own. Many merchants abroad offer dynamic currency
conversion for credit card customers, since they're allowed to
take a commission on the conversion rate. If you're then charged
again by your credit card company, you're taking a double hit on
the currency conversion commission.
When using a credit card travelers abroad may also find that
they pay far more for cash advances from their credit card
company. If you advance yourself $2,000 on your credit card, you
may end up paying:
$55.00 loading fee
$50.00 (2.5% of total) foreign ATM fee
$30.00 (1.5% of total) transaction fee
$25.00 (Interest charges)
Note that many credit card companies charge higher interest
rates on cash advances taken abroad.
How to Have More Money on Your
The recommended solution is to choose your holiday credit card
wisely. In fact, some finances experts recommend having two
credit cards - one that you use at home and one exclusively for
travel abroad. Here are the most important things to remember
when deciding on the best credit card to take on holiday with
1. When choosing a credit card for foreign travel, compare
credit card features and fees for each card you're considering.
2. Choose a credit card that offers cash rewards for spending if
you have the choice between two cards with similar fee
3. Be aware of the currency exchange rate - and the fact that it
varies depending on merchant. There are few regulations on the
commission that can be charged for converting currency, so it's
up to you, the traveler, to shop around for the best currency
4. Consider buying before you go. The currency conversion rate
is almost certain to be lower, and you'll get more money for
your dollar than you would at the airport or overseas.
5. Another option that's often suggested is to use a
pay-in-advance credit card. Because you load it in advance,
there are no finance charges, though you'll pay an upfront fee
for loading the card and may still pay foreign exchange fees on
You'll find a wide selection of prepaid credit and debit cards
at some great comparison websites along with all the information
you need to compare credit card fees when choosing the best
credit card for your holiday.