Credit Cards. Watch out when using your credit card abroad
Going on holiday or business to Spain, France or Italy this year? Then watch out for a new ploy to overcharge your credit or debit card.
Many restaurateurs and retailers in these countries now have the facility to get you to authorise your bill in euros but then they recharge your card in sterling. That sounds innocent but there's a sting in the tail. The retailers charge you an additional service fee of up to 4%! The system is called dynamic currency conversion (DCC).
Beware of extra credit and debit card fees whilst abroad.
DCC guidelines from Visa say that UK cardholders should be offered the option to either have their card charged in euros or to have the transaction changed into sterling before it goes through. It seems that in practice, few of us are being offered the alternative. Many retailers are charging us in sterling automatically - and with the extra 4% fee!
The language barrier might explain the lack of explanation but we are a little more cynical! Even where permission is sought, we doubt whether many restaurateurs or retailers will clearly spell out the additional service fee. After all it's an opportunity to make a bit more profit!
When abroad in Euro-land have credit and debit card transactions done in Euros...
Our advice is that when abroad in euro-land always ensure that your transaction is processed in euros. That's because some UK card operators such as Nationwide, Saga and Lombard Direct will convert euros to sterling at no charge. Others, such as cards from our high street banks, will charge 2.75% as a foreign currency loading fee - but even that's less than the retailers' 4% DCC.
In fact even with a 2.75% foreign currency loading fee, it'll still be cheaper to use your credit card rather than converting sterling to euros before leaving the UK or converting it abroad at the bureau de change. That's because the exchange rates applied by Visa and Mastercard are often much better than you'd get for your cash and travellers cheques whilst abroad. And please don't be fooled by the commission free advertising outside the bureau de change. They might not charges commission but their currency rates are never cheap - after all, how else do they make a crust?
Whilst abroad try not to withdraw Euros using credit of debit cards.
And another bit of helpful advice. Unless it's an emergency don't be tempted to use your plastic to withdraw euros. That's because as with all cash withdrawals, interest will be charged from the minute the euros leave the cash dispenser. Remember, there's never any interest free period on cash withdrawals.
And whilst on points to remember, please be especially vigilant about card security whilst abroad, especially if you're travelling in Eastern Europe. Card fraudsters love holidaymakers and business travellers. That's because they're able to enjoy a bit more time with the card before the card is blocked. Chip and pin technology has helped enormously but there are still risks to watch out for. A report we read last week serves to highlight the problem.
Credit card shock story from abroad...
Mr & Mrs B were on a weeks' break in Prague when Mr B's wallet was stolen by a pickpocket. It was greatly inconvenient and not a little distressing, but they thought that their chip and pin cards would protect them. Imagine their horror when they returned to the UK, to find that within three days of losing the wallet all their debit and credit cards had been raided for thousands of pounds. How could that happen?
It's a fairly common fraud. A trained spotter had watched and recorded the pin number they used at a cash machine and a pickpocket had followed them from the machine to steal their wallet. Armed with the card and the pin number, the fraudsters were in for a field day. That's because this couple, like 1 in 3 cardholders, used the same pin number for all their cards. Naturally, knowing the 1 in 3 statistic, the fraudsters tried the pin number they knew on all the cards in the wallet. Hey presto, bonanza time!
And yes, it does also happen in the UK.
So, two lessons here. Be particularly careful when entering your pin numbers anywhere - not only abroad. Secondly, don't use the same pin number for all your cards. Work some way o remembering them. For example, use the first, second, third and fourth digits from each of the number clusters on that card or some combination like that. Or if you have a better memory than me, memorise a pin for each card!Resource Box
Michael writes for Brokers Online who offer Online Life Assurance Quotes and most UK financial services
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"if you have a credit card such as santander zero and you preload it before you go abroad would you still be charged interest if you kept your card in credit"
"I have seen a comment that one can avoid a DCC scam in Europe by using a euro denominated card. I suggest that your readers should be very wary. I was caught out in such a scam by a French hotel chain. The quote and reservation for the room was in euros as was the bill. I paid with a euro denominated debit/visa credit card linked to a euro account of a UK bank. When I received my bank statement, the charge by the hotel or it's processors had been made in sterling (with a substantial exchange rate margin) and then that had to be converted back to euros by my bank. The rather obvious reason for using a euro denominated card was to pay a euro denominated bill; instead I faced a double exchange rate conversion. So beware! "