How the Smartest Holiday Money Abroad Is on Plastic; Use Credit Cards to Win in the Great Currency Exchange Game
Mawer, Fred, The Mail on Sunday (London, England)
Byline: FRED MAWER
YOU may be able to make your holiday spending money go much further this summer if you use your credit or debit cards. But, as FRED MAWER explains, it depends on what cards you have in your wallet, as some companies impose higher charges than others.
The chart opposite compares how much it costs to obtain foreign cash and traveller's cheques from a leading bureau de change against using plastic to get currency out of cashpoint machines abroad and to pay for purchases.
There are, of course, dozens of credit and debit cards on the market. To narrow the field, Fred picked out the three he uses, as well as cards from the Nationwide building society.
IF you were to use a Nationwide debit card to get money from a cash machine, I calculate that you would be nearly ten per cent better off than if you went to a bureau de change. In America that translates as a [pound]65 saving on $1,500 ([pound]1,063) spending money - enough for a blowout meal.
In other countries, if you take into account commission for cashing traveller's cheques, the savings would be even greater.
In most instances, you will also profit from using other credit and debit cards, especially when you use them to make purchases. Yet the benefits are smaller than with Nationwide because of the charges the other card issuers impose.
Transactions with plastic are based on wholesale exchange rates. These are much more favourable than the 'tourist' rates offered when you swap sterling for traveller's cheques or foreign currency at bureaux de change and banks.
However, card issuers typically impose a handling fee of 1.5 per cent, with a minimum of [pound]1.50, to take money out of a cash machine abroad.
This fee will appear on your statements.
What won't appear is the additional 'exchange rate loading fee', levied on both cash withdrawals and purchases.
This varies, but is often 2.25 per cent on debit cards and 2.75 per cent on credit cards. Find out what your cards charge. If the fees are greater than these, you're getting a poor deal. If you have more than one card, use the one with the lowest charges.
For example, I've now discovered that my NatWest debit card charges a 2.25 per cent handling fee (to a maximum of [pound]4) on withdrawals from cash machines, and a 2.65 per cent exchange rate loading - so I'll use my other cards instead in future.
Nationwide's fees are the lowest around: a zero handling fee on debit cards and 0.5 per cent on credit cards to use cash machines abroad, and no exchange rate loading fee whatsoever on either type of card.
Needless to say, the financial benefits of using credit cards hold only if you pay off your bill in full each month, and with debit cards you need to make sure there is enough money in the account before you travel. …