Buying foreign currency on your debit card might seem like the most convenient way to pay, but hidden charges mean you are adding to the cost of your foreign money.
If you’re off on holiday then chances are you’re thinking about where you can buy your currency in order to get the best deal.
The high street is full of outlets offering commission-free currency, but there are some hidden fees you may not be aware of, especially if you’re buying foreign money on your debit card.
Many of us know that using a credit card to buy foreign exchange costs extra. If you use a credit card to buy foreign money from a bureau de change, your provider will treat the transaction as though you’re withdrawing cash from an ATM. This will incur a charge, known as a cash advance fee which is usually a set fee or a percentage of whatever you’re spending on it.
But to many consumers’ disbelief, the cash advance fee also applies to Visa debit cards - yes the ordinary bank cards you use, and expect to use for free, to pay for goods and services.
So if you go into a Bureau de Change, like the Post Office or Travelex, to buy foreign currency and you pay for it on your Visa debit card you’ll incur a charge. The fee varies from bank to bank but it’s usually around 2 per cent of whatever you’re converting.
Who is charging me?
The charge is actually applied by your bank but most banks claim it comes from Visa, which provides the card.
According to Visa the charge covers the cost of converting currency. So if you bank in pounds and you buy dollars on your card the bank effectively converts the money for you.
Whilst Visa admits it does charge all banks a small fee when customers use the card to buy currency, it says the charges you see comes from your bank and is usually higher than the initial Visa fee they set.
As spokesman for Visa Europe says: “Each bank decides on whether to charge all or part of this fee to cardholders.”
What’s the problem?
Firstly, customers resent the fact that this fee is applied to a transaction which uses their own hard-earned money rather than credit. But the main problem is that some sales staff fail to tell customers about this charge, or leave it until the very last minute.
Barclays customer Chris Smith says he was charged £4.50 on top of his currency at a Travelex branch when he paid using his Visa debit card. But he says he wasn’t told until he actually had his card in the Pin machine.
“She [the cashier] had the money ready piled up to give me, it was only when I’d put my card into the machine that she said ‘oh it’s not £300 but £304.50, because you’re using a Visa card’.
RBS customer Tom Bennett paid for his currency and it wasn’t until he left the bureau de change and checked the receipt that he realised £4.50 had been added on. He complained but was directed to what he calls “a very small piece of paper”, detailing the charges.
Although Travelex says it does its best to make people aware, a spokesman adds: “We openly display signage at each of our stores advising customers that they may be subject to a cash advance fee and all sales consultants are able to advise customers that a fee may apply.”
But they do say that it’s up to the customer to make sure they’re fully clued up about what their banks are charging them by reading their account’s terms and conditions.
Who charges what?
Lloyds TSB charges its Visa debit customers 1.5 per cent of the amount with a maximum charge of £4.50 on all foreign currency and all traveller’s cheques from any other banks, travel agents, bureaux de change and other outlets displaying the Visa sign (i.e. the Post Office or Travelex). The same goes for RBS and NatWest. The following also charge a cash advance fee on currency, although the rates vary.
- Santander
- Alliance & Leicester
- Barclays
- Halifax
- Cahoot
- Co-op
- Smile
Even NatWest customers who currently have a fee-avoiding Maestro card will soon have to watch out for the fee when their debit cards change over to Visa at the end of the year.
How can I avoid this fee?
The simple answer is: pay with cash. Cash purchases aren’t subject to the same fee, that’s because you’re not involving your bank in any currency conversions.
Alternatively, you could switch banks. The good news is, there are some that don’t make you pay to convert your own money – not because they’re not Visa cards, but because the bank has decided not to pass the fee on to the customer. These are:
- Coventry BS
- First Direct
- Halifax
- HSBC
- Intelligent Finance
- Nationwide
