Why Is It More Expensive To Use My Credit Card Abroad?

If you're planning to use your credit card on holiday abroad this summer, the British home office recommends that you think again - or at least compare credit cards to be sure that you're using the smartest credit card for overseas purchases. Thanks to currency exchange fees, foreign bank fees and other transfer fees, they say, your holiday purchases abroad could cost you far more than you expected.

It's important to compare credit cards before you leave on your holiday to find which are the best ones for charging your dinner in Tivoli or your miniature ceramic of the Leaning Tower of Pisa. Some credit card companies don't charge you anything extra no matter where you use your UK credit card; some charge you only if you use the card outside Europe, and others place charges on your card if it's used outside the UK. In addition to any charges levied by your credit card company, you may find yourself paying charges levied by the bank that owns the ATM you take money from, or by the merchant to whom you hand your credit card. Here's a quick look at just some of the fees you may be paying when you decide to use your credit card abroad.

Foreign Usage Loading Fee
The foreign usage loading fee can be as high as 2.75% of every transaction that you make, particularly those made at foreign ATMs. This is actually a foreign exchange conversion charge, similar to what you'd pay if you had your Brit currency converted at a bank or other finance office. You actually may get a slightly better currency conversion rate through your card than you would at a foreign office, but it's not a guarantee. You may also find yourself paying a cash handling fee to the foreign bank as well as an ATM fee to the owner of the ATM.

Dynamic Currency Conversion
DCC allows merchants to charge you in Euros at the till, and charge your card in sterling, or to charge your card in Euros and let the credit card company do the currency conversion. The rub is that the merchants can charge up to 4% in additional charges as a currency conversion charge. That's considerably more than the 2.75% charged by the highest of the credit card companies - especially when you consider that many credit card companies don't charge at all for converting from Euros to sterling when they bill.

According to APACS, UK consumers spend nearly £21 billion while on holiday in Europe each year. In June of this year, the office published a pamphlet with suggestions for using your credit card abroad. Included in the list of advice was that to check your credit cards before you leave to be sure you use the one that will be the cheapest to use. If your research indicates that all of your current credit cards charge high foreign usage loading fees, you might apply for a credit card that charges no currency conversion fees at moneyeverything.com. Just be sure to compare credit cards to find those that offer the best rates on foreign usage so that your holiday won't cost you far more than you expected.