Credit Card Sharks- don’t let them bite you on your holiday
This week the Independent claimed a victory against Barclaycard, forcing them to reveal the interest rate you could get if you aren’t a credit angel as well as the headline rate you could have won.
This means that consumers can weigh up the chances of them getting the advertised 18.9% rate against the possible 29.9% rate offered to the less-than-holy before Barclaycard run a credit check on their account. The difference between the two rates is the widest spread of any major lender, so it’s good news that consumers can make an informed decision.
But another card scenario also requires consumers to know the financial consequence of what they are doing, or pay through the nose. Using your card while abroad can weigh heavily on your pocket when you get back, and it’s best to know what you are doing before you incur the charges.
Figures from uSwitch estimate that one in four consumers will each put an average of £992 on a credit card racking up a whacking great £327 million in additional charges, owing to the average 2.75% exchange rate transaction fee charged by card providers. Those who use their credit card to withdraw cash abroad will be stung even more, with additional 3% cash handling fees and daily interest rates for cash of up to 39.9%.
But are debit cards any better? The same proportion of customers will use a debit card, but in addition to the 2.75% exchange rate fee, an estimated £1.25 transaction charge also applies. This would mean a customer paying a £100 restaurant bill on their debit card abroad could typically end up being charged £104 for the meal – instead of paying £102.75 on their credit card. However, uSwitch figures show that cash withdrawal fees on a debit card are normally 1% cheaper and do not suffer punitive interest charges, unlike a credit card.
Of course, these fees do not take into consideration the cost of changing money anyway, and even if the exchange provider doesn’t charge explicit fees or commission, their take will be incorporated in the exchange rate. Today, ICICI would give you €1,163 in exchange for £1,000, although the strict currency conversion (from xe.com) would give you €1,176. Still, the £13 fee only works out at just over 1%.
Last one in the water’s a wuss.