Don’t let Valentine’s Day be a drain on your wallet

If you’re planning a romantic weekend in Paris to celebrate Valentine’s Day with your beloved, don’t let the costs of spending abroad be a drain on your wallet says Find.co.uk, one of the UK’s leading consumer finance portals.

The vast majority of credit cards charge an extra 2.75 per cent for foreign currency transactions, as well as making a turn on the exchange rate, which can lead to some nasty surprises when you receive your next credit card statement.

Only the i24 card (i24card.co.uk), Nationwide, the Post Office and Saga’s credit cards don’t charge a foreign exchange loading (a fee for converting your spending to foreign currency). In Saga’s case, the ‘no foreign exchange loading’ only applies within the EU. Outside the EU, a 1 per cent loading applies.

By contrast, the SkyCard Master Card levies a thumping 2.99 per cent for foreign exchange transactions, while the average foreign exchange loading across all credit cards is 2.66 per cent, according to Defaqto, the independent financial research company.

Another potential pitfall is the practice of ‘dynamic currency conversion’ (DCC) which is used by some overseas retailers to quietly convert transactions into your home currency, using a poor exchange and commission rate of their choice.

This is how it works. You purchase a handbag in Italy for €100. The shopkeeper (merchant) converts this to sterling, using his own exchange and commission rate, and then presents this to VISA for clearance and settlement back into euros, using the VISA exchange rate.

This unnecessary double conversion can result in extra transaction costs of 3 to 7 per cent and is perfectly legal, providing the merchant gives you the choice of having your purchase transacted in euros or sterling.

If a merchant wishes to use DCC, they should inform the cardholder at the time of the transaction, although often this is not the case and the first thing you’ll know about it is when you receive your credit card statement.

A Nationwide spokeswoman says: “Nationwide recommends its cardholders always opt to pay for purchases in the local currency of the country they are visiting, so that they get the best exchange rate and commission charges. If DCC is used without your consent, you should report this to us and we will pass on the complaint to VISA.”

Nationwide says it will also contact any merchant operating DCC without cardholders consent and can use the ultimate sanction of withdrawing a merchant’s facilities if necessary.

Kate Marsden, Marketing Director of Find.co.uk says: “Using your credit card abroad can be a minefield, so be aware of how much your card provider is charging for foreign currency transactions and ensure that you get charged at point of sale in the local currency, rather than sterling."