Banks should come clean on hidden fees for card use, says EZPay
Holidaymakers are being warned to avoid using their plastic abroad – after it was revealed banks grabbed an estimated £825m in hidden fees last year.
The sum is a staggering £460.5m MORE than was lost to card fraud in 2010, illustrating for the first time how banks fleece unsuspecting customers.
Many consumers are unaware they face a charge every time they use a UK-issued debit or credit card overseas, whether it’s buying a meal or round of drinks, shopping for gifts or even withdrawing cash from an ATM.
In addition, card users are automatically given a poor exchange rate, which effectively skims more money from each transaction.
Leading pre-paid MasterCard supplier EZPay – part of the Phones4U Group – is calling on financial institutions to come clean over their fees.
EZPay managing director Paul Smith said: “The banks love to encourage card use overseas by saying they can be used just as simple as at home, but they never mention the charging that goes on. Hitting people with fees for every transaction is a lucrative racket.
“People can avoid these charges and still have the convenience of plastic by getting themselves a pre-paid card such as our Escape Travel Money product – that way, all the money you load on and spend is for your benefit, not the banks.”
The massive charges hived off by banks equate to around 3% of the money spent by Brits on debit and credit cards abroad. According to official figures released by The UK Cards Association recently, that total was £27.5bn. The card industry’s own figures reveal a total of £364.5m was lost to card fraud in the same period.
How the charges hit consumers:
Those using their UK abroad are hit in two ways – fees charged on each individual card transaction, plus an exchange rate that is generally less favourable than is available elsewhere.
Typical charges for using a debit card range in store/restaurant from £1.25 – £1.75 per transaction, while ATM fees range from £1.50 to £5 every time money is withdrawn.
Banks often give customers their prevailing exchange rate, but tweak it with an extra percentage charge – making the rate much worse than those available with dedicated pre-paid cards.
For example Total cost (all fees/charges included)
A typical 50 euro meal for two
NatWest debit card = £47.04
Escape Travel Money pre-paid Mastercard = £39.75
Withdrawing 20 euros from a Spanish cash-point machine
Lloyds TSB debit card = £19.90
Escape Travel Money Card = £15.90
Examples calculated during March 2011
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About the figures:
- 3% figure ‘guesstimate’ is an averaged out figure which takes into account all the fees and charges levied by debit and credit card issuers. (3% of £27.5bn = £825m). We’ve been quite conservative in our calculation of this.
- There are three main charges that apply when using UK issued cards abroad:
- A ‘Load’ on top of the Exchange Rate (Debit and Credit Cards) : you buy something in a foreign currency that transaction has to be converted back into sterling at the prevailing wholesale exchange rate. The card provider can add a ‘load’, usually 2.75% to the prevailing wholesale exchange rate
- Cash Withdrawal Charges (Debit and Credit Cards): get money out of a machine and you pay a fee. This is usually around 2.5% of the amount withdrawn with a minimum of, around £3. Can rise to a maximum of £5 for big cash withdrawals
- Usage fees (Debit cards): Some big banks hit you with a charge every time you use your debit card overseas (between £1 and £1.50 typically)… with Halifax, IF, RBS, NatWest, Santander or Lloyds TSB debit card and you’ll pay a fee each time e.g. Halifax adds £1.50 per transaction.