Brits urged to avoid getting burnt by bank fees this August
TotallyMoney, the credit app which helps everyone move their finances forward, has commissioned Moneycomms to investigate the extent of card charges imposed on holidaymakers.
Withdrawing £100 from an ATM with MBNA, Halifax and Lloyds Bank credit cards can set customers back an additional £7.95 in charges
Even debit card issuers will punish holidaymakers for simply spending abroad. A £100 cash withdrawal with an HSBC or First Direct card could cost an extra £4.75
When it comes to exchange rates, customers will be offered the choice of paying in the local currency, or pounds sterling when making a transaction abroad. The local currency will usually be the better, and cheaper rate. Worryingly, a OnePoll survey commissioned by TotallyMoney discovered 4 in 5 respondents didn’t realise this
With the average Brit spending £670 abroad each year (£62.3 billion in total), there’s real money to be saved/ lost on payment transaction fees
Full research tables, further analysis and commentary, along with TotallyMoney’s top tips for holiday spending, can be found below.
Avoid a shock post card payment
With August traditionally being the busiest UK month for foreign travel, TotallyMoney is urging Brits to avoid getting burnt by foreign exchange fees, cash withdrawal charges, and confusing Dynamic Currency Conversions (DCC).
Charges usually differ provider to provider, and card to card, so customers may be unaware they’re paying over the odds. The two main fees holidaymakers should look out for are:
Non-sterling transaction fees: Set at around 3% of the value of the transaction, these are applied when you make a payment in a foreign currency
Cash withdrawal fees: Withdrawing money from an ATM will usually carry an additional fee. This will be set as a percentage of the value of the transaction, or a minimum of around £3
Additionally, when withdrawing cash or paying by card, customers will be given the option to pay in either pounds sterling, or the local currency (DCC). As a rule of thumb, always pay in the local currency for cheaper exchange rates. Worryingly, a OnePoll survey, commissioned by TotallyMoney discovered that 4 in 5 Brits were unaware of this.
By understanding these fees, and checking their card providers' charges, customers can make sure their money goes further this summer.
A £100 cash withdrawal in Europe could cost £107.95 when using MBNA, Lloyds Bank, and most Halifax credit cards. However, for the same transaction using the Halifax Clarity, or Barclaycards Rewards credit cards, customers will repay no more than they withdraw.
Based on the average annual holiday spend of £670 per person, per year, fees can quickly add up over a number of smaller separate transactions.
When it comes to debit cards, Virgin Money, Chase Bank, and Starling Bank all carry zero fees. This means customers can feel sure they’re getting the most out of their money.
Alastair Douglas, CEO of TotallyMoney comments:
“If you’re looking to make your money go further this summer, make sure you understand what you could be charged for using your card abroad. These fees can eat into your budget, casting a shadow over your holiday.
“Some issuers will charge 2.99% for paying by card, and £3 to £5 on a cash withdrawal. That means an equivalent £100 transaction could set you back £6 to £8 in fees — so it’s worth packing a more cost-effective alternative.
“If you’re thinking about taking out a new credit card, make sure you do your research. Not everybody will have access to the best in market offers, so check the information on your credit report is correct, and use an eligibility checker before applying. That way you’ll know your chances of acceptance.
“At TotallyMoney, we’re on a mission to help everyone move their finances forward. One way we’re doing this is by arming customers with the tools and information they need to better understand credit. So they can make their money go further, and gain financial momentum along the way.”
Andrew Hagger, Personal Finance Expert and Founder of Moneycomms comments:
“Always pay in the local currency when you’re abroad — whatever type of plastic you use overseas beware of an increasingly common custom (particularly in Europe) where the foreign retailer or ATM gives you the option to pay in pounds sterling, known as Dynamic Currency Conversion (DCC).”
“Although you may think it is useful to know exactly how much you’ll be debited in GBP, the downside is that it gives the retailer the opportunity to use an uncompetitive and costly exchange rate — the golden rule is never pay in British pounds.”
TotallyMoney’s top three travel money tips:
1 - Check fees levied by your lender:
That way you can better budget for your trip, and be prepared for any unexpected surprises. If your current card carries high fees then consider applying for a zero fee product if eligible.
2 - Don’t buy travel money with a credit card:
This is likely to count as a cash advance. These carry additional fees of around 3%, or a minimum of £3, and a higher interest rate which kicks in as soon as you make the transaction.
3 - Cover expensive purchases with a credit card:
Holiday makers can protect any larger purchases (such as booking flights and hotels) with Section 75 of the Consumer Credit Act. Transactions costing between £100 and £30,000 are covered, and only valid with credit cards — not cash, debit cards, loans or buy now pay later services.
Sources
Research by Moneycomms.co.uk 12.07.2022
Consumer survey undertaken by YouGov Plc. Total sample size was 2441 adults. Fieldwork was undertaken between 21st - 22nd April 2022.
Before the pandemic hit, in 2019, the average UK resident was abroad for a total of 9.7 nights and spent £670 while there. In total, 93.1 million trips were taken, amounting to £62.3 billion spent abroad by tourists from the UK. Source.
