The holiday season is here! but beware of credit card charges...
4 July 2007
The holiday season is soon upon us and as we all head for our mountains, valleys or surf, it may be worth your while looking at the expense of using a credit card overseas.
OH how I long for one world currency in order that no-one can delve their hands into my pocket in this way.
I went off for a little trip to Killarney last month. At the end I paid the remainder of my bill on my MasterCard.
When the bill came in I was confused by the exchange rate given between the Euro and sterling and called Alliance and Leicester to find out why. I spent the first ten minutes navigating the telephone options of: press one to speak to someone who can't assist, two to be sent into a circle of meaningless messages and three to be sent to outer space. Somehow I managed to get through to an individual who insisted that I was charged the correct rate and there was no commission involved. I politely advised them they were wrong and that I was charged at a rate of 0.69941 whereas the bank rate on that same day was 0.67787. (1)
My 685 euros bill had just cost me £479.10 as opposed to £464.34 – effectively a £15 charge for using my credit card. Every person I spoke to said they didn’t charge extra. I was transferred to Florida to speak to MasterCard. They confirmed they use the forex rate, yet their call waiting said they layered a surcharge using a currency conversion ratio process (an extra charge). I spoke to someone who then said that my provider in the U.K. was hitting me with a charge hidden in the exchange rate.
So I transfer back to the UK and whilst on hold I am told that “our specialists are assisting other customers” To cut a very, very long story short, I managed to speak to a supervisor who advised they do in fact layer a charge on the currency exchange rate and that the standard charge for most cards is around 2.75 – 3%! So when you say no commission what do you mean?
It got worse before it got better. I found out that not only was I charged 22.9% on any cash I had taken out, but that I was also charged a cash advance fee of £2.50 (2.5% in my book). If you think that taking cash out or buying currency before you go holiday is a good idea – think again. Most of the banks including the post office, offered 0.7066 which was even worse. When asked, once again they didn’t know why the rate was so poor, and once again they didn’t know if this was a disguised charge – “but we don’t charge commission” they said.
I was disgusted by the fact that this charge is disguised and therefore sought to find out where I could buy overseas currency at the best rate.
The solution I found was twofold. In the first instance I immediately dumped my credit card in favour of the Nationwide credit card which on the same day was offering me exactly what the Forex rate was quoted i.e. no layered charge. I am unsure if they are the only firm offering this but I spent two days trying to find the information out in the first place. Secondly when I am going abroad and need cash, I take a trip to www.comparetravelmoney.co.uk who will find the best rate for me for my cash to turn into a foreign currency. Crown currency exchange for example will offer me a rate of 0.6942 today for Euro but if I am prepared to order 31 days in advance, I will benefit from a rate of 0.67517(2). In monetary terms that means I would have saved £17 on one bill alone.
Anyhow, enjoy your holidays!
If you have a question about this article or a financial query, call on 0845 230 9876 or e-mail info@wwfp.net
The holiday season is soon upon us and as we all head for our mountains, valleys or surf, it may be worth your while looking at the expense of using a credit card overseas.
OH how I long for one world currency in order that no-one can delve their hands into my pocket in this way.
I went off for a little trip to Killarney last month. At the end I paid the remainder of my bill on my MasterCard.
When the bill came in I was confused by the exchange rate given between the Euro and sterling and called Alliance and Leicester to find out why. I spent the first ten minutes navigating the telephone options of: press one to speak to someone who can't assist, two to be sent into a circle of meaningless messages and three to be sent to outer space. Somehow I managed to get through to an individual who insisted that I was charged the correct rate and there was no commission involved. I politely advised them they were wrong and that I was charged at a rate of 0.69941 whereas the bank rate on that same day was 0.67787. (1)
My 685 euros bill had just cost me £479.10 as opposed to £464.34 – effectively a £15 charge for using my credit card. Every person I spoke to said they didn’t charge extra. I was transferred to Florida to speak to MasterCard. They confirmed they use the forex rate, yet their call waiting said they layered a surcharge using a currency conversion ratio process (an extra charge). I spoke to someone who then said that my provider in the U.K. was hitting me with a charge hidden in the exchange rate.
So I transfer back to the UK and whilst on hold I am told that “our specialists are assisting other customers” To cut a very, very long story short, I managed to speak to a supervisor who advised they do in fact layer a charge on the currency exchange rate and that the standard charge for most cards is around 2.75 – 3%! So when you say no commission what do you mean?
It got worse before it got better. I found out that not only was I charged 22.9% on any cash I had taken out, but that I was also charged a cash advance fee of £2.50 (2.5% in my book). If you think that taking cash out or buying currency before you go holiday is a good idea – think again. Most of the banks including the post office, offered 0.7066 which was even worse. When asked, once again they didn’t know why the rate was so poor, and once again they didn’t know if this was a disguised charge – “but we don’t charge commission” they said.
I was disgusted by the fact that this charge is disguised and therefore sought to find out where I could buy overseas currency at the best rate.
The solution I found was twofold. In the first instance I immediately dumped my credit card in favour of the Nationwide credit card which on the same day was offering me exactly what the Forex rate was quoted i.e. no layered charge. I am unsure if they are the only firm offering this but I spent two days trying to find the information out in the first place. Secondly when I am going abroad and need cash, I take a trip to www.comparetravelmoney.co.uk who will find the best rate for me for my cash to turn into a foreign currency. Crown currency exchange for example will offer me a rate of 0.6942 today for Euro but if I am prepared to order 31 days in advance, I will benefit from a rate of 0.67517(2). In monetary terms that means I would have saved £17 on one bill alone.
Anyhow, enjoy your holidays!
If you have a question about this article or a financial query, call on 0845 230 9876 or e-mail info@wwfp.net
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© 2007 Worldwide Financial Planning - this site is intended for UK investors only
By clicking on any of the external links within this website you will leave the regulatory site of Worldwide Financial Planning Ltd. Worldwide Financial Planning Ltd are not responsible for the accuracy of the information contained within the linked sites.'
'Worldwide Financial Planning Ltd are authorised and regulated by the Financial Services Authority. Worldwide is entered on the FSA register www.fsa.gov.uk/register/ under reference 440668
Registered office; The Old Carriage Works, Moresk Road, Truro, Cornwall, TR1 1DG. Registered in England and Wales No. 3533548. Contact info@wwfp.net or 01872 222 422
© 2007 Worldwide Financial Planning - this site is intended for UK investors only
By clicking on any of the external links within this website you will leave the regulatory site of Worldwide Financial Planning Ltd. Worldwide Financial Planning Ltd are not responsible for the accuracy of the information contained within the linked sites.'
(2) http://www.crowncurrencyexchange.com/
http://www.comparetravelmoney.co.uk/index.asp?sort=USD&#compare
http://www.forexrate.co.uk/quotes/eur.php
Peter McGahan is an Independent Financial Adviser and the Managing Director of Worldwide Financial Planning Ltd who are authorised and regulated by the Financial Services Authority. 'The FSA does not regulate Credit Cards, Will Writing and some forms of mortgage and Inheritance Tax Planning.'
Information given is for general guidance only, and specific advice should be taken before acting on any suggestions made.
The above represents the personal opinions of Peter McGahan.
All information is based on our understanding of current tax practices, which are subject to change.
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