Brits Burning £192 Million in Card Charges Abroad

This year 30 million consumers are planning on going abroad and a new study from credit comparison website Totallymoney.com, reveals that these holidaymakers will be spending £9 billion in overseas plastic spending – running up a potential £387 million in fees and charges if they pack the wrong cards.

When using plastic abroad the charges that are levied against both credit and debit cards and are composed of a mixture of foreign exchange loading fees, debit card transaction fees and cash withdrawal fees.

When trying to identify the cheapest way to pay, our research shows that if consumers pay for a £250 hotel room with currency purchased at the airport it will cost them a total of £280.74, compared to a total of £256.68 if they paid with the average credit card.

The best credit cards don’t levy any charges so the £250 hotel room should only cost £250. Choosing the wrong form of payment whilst abroad can inflate the original price by up to 12%.

Cash withdrawal rip-off

When it comes to withdrawing cash on a credit card overseas cash withdrawals are a really expensive way to pay. Our research shows that the average withdrawal is around £106 and pay an average £8.20 for every transaction in additional fees and charges. These include foreign exchange loading charges, cash withdrawal fees and an average inflated interest rate of 24.5% from the moment the cash is withdrawn.

Travellers are expected to withdraw almost £1.5 billion on credit cards whilst on holiday as they make 14.2 million ATM transactions racking up total charges of £117 million. Consumer understanding of these charges is low as one in four (25%) are totally oblivious to the fact that it costs more than a debit card withdrawal and almost a third (31%) don’t know that it costs more than  a standard credit card purchase.

Disastrous Debit

Debit cards are a popular choice for one in four (27%) overseas spenders.  Whilst not cheap, they offer better value than credit cards when it comes to cash withdrawals as they charge no interest. However, consumers should expect to rack up a total bill of £87 million as they are hit with an average foreign exchange loading charge of 2.67% for every transaction alongside an average cash withdrawal fee of £1.08.

Travellers withdraw an average of £117 per transaction on debit cards overseas which costs around £5.72 in fees and charges a time – 30% less than the fees incurred on a credit card (£8.20).

For payments and purchases our research shows that people will spend just under £100 on each transaction incurring total costs of £3.70.

Pre-paid cards

13% of consumers will choose pre-paid cards for holiday spending which allow consumers to pre-load money from a bank account onto a card fixed at that day’s exchange rate. However, there are downsides as many of these cards carry fees and charges for start-up, overseas ATM withdrawals and in-activity fees if you leave a post-holiday balance on them.

The cheapest way to pay for a €302 hotel room

Total cost of a €302 (£250 at today’s exchange rate) hotel room including fees and charges based on the following payment methods: Total cost in £’s % added to the cost with the addition of fees and charges and interest
Currency purchased at the airport* £280.74 12.30%
Cash withdrawn on a credit card £264.90 5.96%
Cash withdrawn on a debit card £258.18 3.27%
With a debit card purchase £257.76 3.10%
With a credit card purchase £256.68 2.67%
Currency purchased at a competitive rate* £255.38 2.15%
Prepaid card – Fair FX Euro Card Mastercard £255.00 2.00%
Halifax Clarity Card £250.00 0.00%

    Source, TotallyMoney.com, correct as at 31st March 2014. *Gatwick Airport Bureau de Change

Right way to pay:  Cost of paying for a £250 hotel room

Based on our research, the cheapest way to pay for a £250 hotel room whilst overseas is by making a direct payment with the Halifax Clarity Card or another credit card with no foreign exchange loading.  They offer free transactions compared to a cost of £5.38 on the average credit card.

Top of the ‘expensive way to pay’ list is the use of currency purchased at the airport. In effect, this will add around 12% to the original price of the hotel room which means consumers will pay £30.74 extra once the exchange rate and the fees and charges are taken into account.

Next worst is the use of cash withdrawn on a credit card which will add 6% or £14.90 to the cost of the hotel room.