After months of relentless rain, the sun is finally shining and Britain is drying out from the wettest early summer in more than a century. What’s more, with the school holidays now upon us, millions of Brits are jetting off abroad to soak up some sun, sea and sangria.
The good news is the euro has fallen to a four-year low against the pound. British holidaymakers are now getting around €1.28 to the pound, which means their money will go a lot further in the 17-nation euro zone.
Sadly, we Brits waste a fortune every year by using the wrong credit and debit cards overseas. Indeed, it’s reckoned that we pay around £500 million a year in extra charges for using plastic cards abroad.
What are these charges which make using plastic abroad so expensive?
First, there is a fee for making purchases in a currency other than sterling, known as a currency loading charge. Typically, this will add 2.5% to 3% to the cost of any foreign transaction, which works out to an extra £25 to £30 for every £1,000 spent overseas.
Second, exchange rates can vary widely from bank to bank. Of course, the worse the exchange rate, the fewer euros, dollars or yen you get to your pound.
Third, when you withdraw notes from cash machines, there is a cash-withdrawal fee. Usually this is 3% of the withdrawal with a minimum fee of £3.
Fourth, withdrawing cash on a credit card usually means paying sky-high interest rates from day one until this expensive debt is cleared. Typically, such withdrawals will be charged at yearly interest rates around 25% APR, or 2% a month.
Therefore, when going on holiday, you must take the right credit cards with you. Otherwise, you could pay a hefty price every time you hand over your ‘flexible friend’.
Plastic protection: Section 75
There is one powerful reason why it makes sense to pay by credit card for major holiday purchases, including your flights, accommodation and car hire. Under Section 75 of the Consumer Credit Act (known as S.75), lenders (in this case, your card issuer) “stand in the shoes of suppliers”.
In other words, if a retailer or other provider doesn’t deliver on its promises, then your card issuer is jointly liable for any breach of contract. This legal protection applies to goods costing between £100 and £30,000, where the full amount (or any deposit) has been made using a credit card or other credit agreement.
Therefore, if goods or services don’t arrive, or aren’t as described, of satisfactory quality and fit for purpose, then you can make a S.75 claim against your credit-card issuer for a refund or replacement. This valuable cover even applies abroad, but is not provided by debit cards.
I always pay for package holidays, flights and all non-trivial purchases abroad using my credit card. If anything goes wrong, such as the airline or tour operator going bust, I can reclaim my loss from my credit-card issuer.
In short, S.75 is a valuable safety-net for fun in the sun!
Best buys for British holidaymakers
If you’re not jetting off to far-flung shores for a few weeks, then it makes sense to apply for one of these table-topping credit cards right now. By doing so, you can enjoy your holiday that much more, knowing that you’re not being ripped off every time you flash your plastic.
|Credit card||Loading fee EU/World||Cash withdrawal fee||Purchase rate||Cash withdrawal rate|
Clarity Credit Card MasterCard
|None/None||None/0%||12.9% APR||12.9% pa|
Gold Credit Card MasterCard
|None/None||None/0%||20.1% APR||24.9% pa|
Over 50′s Platinum Visa
|None/None||2% (min: £2)||11.9% APR||21.5% pa|
|None/None||2.5% (min: £3)||16.9% APR||26.9% pa|
As you can see, the Halifax Clarity and Sainsbury’s Bank Gold cards are our clear winners, as they charge no loading fees anywhere in the world. Also, neither charges cash-withdrawal fees (but Sainsbury’s Bank charges a hefty rate of 24.9% a year on cash withdrawals).
Saga’s Over 50′s Platinum Visa also has no loading fees, but has a 2% fee for cash withdrawals, with a minimum of £2. Likewise, the Post Office levies no loading fee, but charges 2.5% (minimum £3) per cash withdrawal.
Finally, Nationwide BS used to offer market-beating credit cards for use abroad, but has fallen out of favour. Today, Nationwide BS charges a 2% loading fee, plus a charge of 2.5% (minimum £3) per cash withdrawal, making its cards Don’t Buys instead of Best Buys.