Most tourists are getting mugged several times a day during their holiday.
And thanks to the fact that the criminals are usually their banks, scraping off fees and commissions, they don’t even realise it.
Lets say, for example, that you have a Barclays debit card and you use it to pay for a souvenir when abroad. Do so, and you’ll pay a 2.75% charge with every transaction – to cover “handling costs”. Then, if you use the card to withdraw money from a cash machine that isn’t part of their Global Alliance, you’ll pay another 2% on top of the 2.75%.
That’s almost a 5% fee just for the privilege of withdrawing your own cash while abroad. And most other banks are robbing their customers too.
So how can you avoid these fees?
Abandon Nationwide
In the past I would have extolled the virtues of the Nationwide Flex account at this point.
Not anymore.
The Flex cash card was once free to use anywhere in the world. Last year that ended when they brought in a fee of 1% for some countries.
And soon you won’t even be able to use the card to withdraw cash abroad. Why? Because Nationwide is trying to get rid of the likes of me. I only have an account with them so that I save money when I am on holiday.
That means they make no money from me – most of the time my account is empty. I just plop some money in it when I’m going abroad. They hate that and they’d much prefer me to use it as my main account. So they are stopping people with the basic cash cards from being able to withdraw money abroad. If you want that facility you will have to upgrade to their Flex account with Visa Debit card. But when considering applications, “one of the factors we will look at is whether Flex will be your main account,” says Nationwide.
But that makes no sense for me. The Flex account is not a good current account. It doesn’t pay any interest, the overdraft rate is 18.9%, and if you slip beyond your agreed overdraft limit, you’ll pay a £30 fine each time.
If I wanted a new current account, I’d look elsewhere. Perhaps to Alliance & Leicester’s Premier Direct Current Account. For the first year, it offers a 5% interest rate and a 0% overdraft.
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Pick prepaid plastic
So if you have a Nationwide account, ditch it now and opt for a cheaper and more flexible prepaid card.
Prepaid cards work exactly like a debit card. You can use them to pay for things, or to withdraw cash. The only difference is they don’t draw money from your bank account. You load them with cash before you use them. Put £50 on the card and you can spend £50 with the card.
So which one should you get? If you want a card you can use anywhere in the world at a minimal cost then the Caxton FX Global Card is a good choice.
There are no charges for using the card abroad or putting money on it and you can use it anywhere in the world. The only set charge is £1.50 per transaction if you use the card in the UK. But as you’ve got the card for your holiday money, this shouldn’t be a problem. The exchange rate used for all transactions also tends to be excellent.
The added benefit of this card is that it is a prepaid MasterCard – so if you use it to buy flights from Ryanair, you won’t pay a booking fee. That’s a saving of £10 per person every time you book return flights (minus the £1.50 fee for using the card in the UK).
If you fly with Easyjet more than Ryanair, go for the Travelex Cash Passport. This is another prepaid card that isn’t quite as cheap as the Caxton FX card – some Travelex cards charge you to load money onto them. But it is a Visa Electron card, which is the only type of card that doesn’t face a booking fee from Easyjet.
Don’t fall at the final hurdle
When you are paying for items abroad, don’t lose your vigilence just because you know you have a good card. When paying for something, you’ll be asked if you want to pay in pounds sterling or the local currency. Always pay in the local currency. If you choose to pay in sterling you’ll be charged an extortionate exchange rate.
• This article is taken from our weekly MoneyWeek Saver email.
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