If you're escaping Britain for a few weeks of months in Europe this year, then you need to be aware of the extra charges you could be facing on your credit or debt card.
In France, Italy and Spain, a number of restaurateurs and retailers now have the facility to request that you authorise your payment in euros, but possibly innocently enough, they actually put the payment through in sterling. What's the problem? The problem is the 4% service charge that you end up paying through a system known as dynamic currency conversion (DCC).
We had a look at Visa's DCC guidelines and they say that UK cardholders in these countries should be given the option, when paying, to have the payment converted into sterling before it goes through. However, that often is not the case, and the retailer puts the transaction through without any mention of any extra charges. That's an extra 4%, which certainly adds up after a few purchases.
We could put this unfortunate and costly situation down to the language barrier, however, that 4% ends up in the retailer's pocket, so we're finding it hard not to get a little cynical. If they did spell out the options, they could lose that 4% straight profit, now that wouldn't be good business sense!
We suggest that when you are travelling in these countries, you make sure that the transaction is processed in Euros. Some UK card operators, including Nationwide, Lombard Direct and Saga will complete the currency transaction at no extra cost to you. Most of the high street banks charge a 2.75% currency conversion charge, however that's still less than the retailers' 4% DCC charge.
After some swift research, we have found that you are actually better off, even taking into account the 2.75% foreign currency fee, using your credit card abroad. That's compared to both changing the money before you go, and changing it when abroad at the bureau de change. The exchange rates you'll get while abroad directly through Visa or MasterCard will be a lot more favourable than by changing cash or traveller's cheques. Plus you get the added bonus of security, because you're not carrying so much money around with you.
An extra word of warning don't be taken in by the promise of commission free' advertising they cover that cost by charging you more on the exchange rate, so you won't make any kind of saving. That's how they make their money!
We also advise you strongly not to use your credit card to withdraw money from the cash machine while in Europe. You'll start paying a very high rate of interest from that moment on, and you'll really see the difference when you get your credit card statement. Only use your debit card to withdraw Euros straight from the cash machine.
We've already mentioned security, well make sure you keep a close grip on your credit and debit cards. Especially if you're travelling in Eastern Europe, there are plenty of card fraudsters around looking for a golden opportunity to make off with your plastic. They could get hours, even days of fun until you notice it's gone and report it missing. You may think that chip and pin would have eradicated the possibility of card fraud, but although it has helped, it's not been a total cure.
This true story explains:
Mr & Mrs B went on holiday to Prague for a week. Unfortunately Mr B's wallet was stolen from his pocket during the week, so they lost all their cards. They wrongly thought that the thieves wouldn't be able to use the cards because they were chip and pin. They discovered, on their return to Britain, that thousands of pounds had been taken from both credit and debit cards.
Here's how: an eagle-eyed criminal watched them input their pin number at the cash machine. Then the same gang followed them and pick pocketed the wallet. They had one pin number which they knew would work, and they then tried out the same pin number on the other cards it worked on those too. 1 in 3 cardholders have the same pin number for all their cards, because it's easier to remember. Knowing the odds, the fraudsters struck lucky and had the run of a number of credit cards. The same thing can easily happen here, you don't need to be abroad.
There are two essentials here:
Always be careful when inputting your pin details, because anyone could be watching.
Have different pin numbers for all your cards. It is a little harder to remember but not impossible. Develop a system, use different birth dates for different cards, or use combinations of easy to remember numbers.
Whatever you do, just don't fall victim to these fraudsters.
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