Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk
3 November 2017

How Overseas Credit Card Charges Work

If you are looking to go overseas, you will probably be taking your credit card. Having a credit card saves you from having to take wads of cash or cumbersome traveller’s cheques around with you. However, from a financial point of view, this can also be dangerous. Since you will be using it overseas, you may or may not be aware that you can expect to face various charges for using your credit card whilst abroad. 

Even if and when your credit card is accepted abroad, there may be fees involved. While it tends to be very tempting to use a credit card while out of the country, always beware of the costs that are associated with doing so. ATM’s can charge a foreign credit card up to 2% per transaction. Furthermore, some companies may charge you in the region of £3 for every £100 you withdraw from an international ATM, for example, a rate of 3%. 

Ensure that you call your bank before you leave the country to let them know it will be you using the card in somewhere outside of the UK. This stops the unpleasant situation of your bank blocking your card for security, leaving you with no money to use whilst out of the country. In addition, ask them about any credit card charges that may be incurred when you are away and how they deal with these at your particular bank. 

Ways in Which You Can Be Charged Abroad

Some cards will charge you when you use them in a different country in variety of different ways. These can include:

  • Cash Withdrawal Fees – Using your credit card to withdraw money from an ATM will result in a charge. The fee you may have to pay can sometimes be as high as around 2%-3% of the total amount of money you withdraw. For example, if you went to take out the equivalent of £100 from a foreign ATM, you would be paying a fee that equated to £2 or £3. The more you take out, the higher the fee and the more you are paying as a consequence. This also applies to debit cards
  • Foreign Exchange Fees – When using your credit card in a foreign country to make a purchase, you may find that you are required by your card provider to pay a foreign exchange fee (also known as a ‘loading charge’) of around 2.75%. This also applies to debit cards
  • Interest Charges – If you do not end up paying off the balance of your credit card in full, you will be charged an interest rate on it unless it offers a specific 0% window. However, even if it does offer this 0% window on your purchases, this will not apply to cash withdrawals and you may be charged interest from the day of the withdrawal of cash

Currency Conversion Charges

When making a purchase in a shop abroad with a credit card, the retailer may or may not give you the choice to pay what is due in your own home currency. This would be in place of paying in the currency native or local to the place from which you are buying the goods from. This is what is known as ‘dynamic currency conversion.’

While this may seem extremely convenient as you can see things in your own ‘language;’ the exact value you are paying for the goods, this method can come at a high price. The charges you may be charged can in fact be very high for dynamic currency conversion, that it is not even worth buying the products if there is no other option. In some cases, the retailer may automatically use dynamic currency conversion unless you specify otherwise. The best advice is to check the bill carefully before signing anything or entering the PIN for your credit card. It is also wise to ask to be billed in local currency instead, as these charges are often lower than that of your native currency.  

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Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk