But ‘non-sterling transaction fee’ has got to be one of the worst, particularly because it’s totally preventable with a little bit of care and attention.
Alas, care and attention were lacking with me last month, when three nights away in Dublin cost me £7 in ‘non-sterling transaction fees’.
Looking at my bank statement today, I’m thinking if only I’d been organised enough to load up my travel money card in advance.
But what are the options if you’re away on a longer holiday and want to avoid the fees charged by your bank for processing a transaction in another jurisdiction’s currency?
EasyFX, a foreign exchange and travel money card company, has said that most of us are missing out on savings of up to £100 when we’re exchanging money.
Yes, we’ll slave for hours over the laptop to get the best-value flights and hotels.
But our common sense deserts us when it comes to spending, so we use our credit and debit cards with wild abandon on holiday.
Thankfully Nick England, chairman of EasyFX, has plenty of ideas on how not to get caught out.
Know your fees
These are the possible fees you could be charged while you’re away sunning yourself.
Non-sterling transaction fee — a charge for every transaction you make with your card. For UK customers this is usually 2.75-2.99%.
Non-sterling purchase fee — this is charged every time you make a purchase using the card and is usually about 0-1.25%.
Cash withdrawal fee for foreign ATMs — charged every time you use an ATM in the Republic or overseas. Ranges from about £1.50-2.
These are rough estimates, and will vary from bank to bank. It’s always good to find out about your own bank’s fees and charges before you go away. And don’t forget that you can also be charged extra by bureaux de change and foreign banks when converting currency if you have decided to bring a sterling stash.
Use Global Alliance ATMs
A group of banks across the world have formed the Global ATM Alliance, a network of banks who allow their customers to use their ATMs with no fees.
For UK customers, Barclays is the main bank participating in this. If you’re a Barclays customer you can use foreign ATMs from banks such as Deutsche Bank, Bank of America, BNP Paribas and Westpac without being charged foreign fees.
Never choose to ‘pay in sterling’
When using your debit or credit card to make a purchase abroad, you’ll often be asked whether you want to pay in the local currency or in sterling. At first, paying in sterling seems like a great idea because you know how much you’ll be paying in your own currency and there are no surprises. But don’t be fooled. Choosing to pay in sterling will always be more expensive due to something called dynamic currency conversion. This is where the vendor gets to set their own exchange rate, which will usually leave you out of pocket when compared to your own bank’s exchange rate. Choose instead to pay in the local currency and let your bank apply the exchange rate later on.
Spend the time researching the options
Research shows that 27% of holidaymakers spend no time looking for a better deal on exchanging currency ahead of their trips. However, for those who do spend time actively looking for a good deal, 64% of them see savings of up to £100.
Looking to the conventional comparison sites is a great place to start — a lot of these sites have travel money sections which provide you with the best options available, for example, money.co.uk.
Explore other ways to convert currency
One alternative is a prepaid currency card, which is a great way to carry your holiday money with less risk. Use them instead of your usual bank card and you’ll be paying for everything in the local currency, thus avoiding all those foreign bank fees. They are usually completely free and involves no hidden charges. You simply top up your account with a credit or debit card, purchase your currency and start spending.
Don’t just look to save on flights and hotels
If people were to spend the same amount of time shopping for the best foreign exchange deal as they do for flight and accommodation savings, they could see far greater holiday savings.
The Post Office annual Holiday Spending Report found evidence of growing complaints about charges for using credit or debit cards and for using ATMs.
Its travel money card is one of the best-known out there and one I’ve used extensively in the past. EasyFX also offers the same kind of product.
Laura Plunkett, head of travel money at Post Office, which accounts for one-in-four UK foreign exchange transactions, said: “Despite good intentions, our research shows that the majority of holidaymakers are struggling to get their budget right and end up paying a financial penalty for this when they need to change more money while abroad.
“When planning a trip abroad, it is worth bearing in mind that there are improved rates for higher value exchange transactions in Post Office branches and online. This means holidaymakers who set realistic budgets based on past experience will get more for their money and can avoid the risk of poor exchange rates and transaction charges incurred at ATMs abroad or when paying with credit or debit cards.
“Another practical solution is to carry a combination of foreign notes and funds held on a pre-paid travel money card that will not incur transaction charges.”
