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Banks rip off customers by pushing up price of using credit cards abroad


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Banks rip off customers by pushing up price of using credit cards abroad


by SEAN POULTER - More by this author » Last updated at 00:45am on 14th July 2007 commentIconSm.gif Comments (8)

Banks are pushing up the cost of using plastic cards overseas just as millions of families take their summer holidays.


Travellers face higher charges on everything from buying a meal in a restaurant to hiring a car or paying a hotel bill.

As much as £6 in every £100 is going to the banks in some cases and industry analysts suggest the total figure for these hidden charges was £326million last year and will be approaching £500million for 2007.

Every time a card is used to make a purchase or withdraw cash overseas, at least one and sometimes two fees are added. The extra charges could cost a family of four more than £40 over a two-week holiday.

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Most banks hide away these charges, rather than spelling them out on a statement. They collect the money by manipulating the currency exchange rate which is used for the transactions listed on statements.

Several of Britain's biggest banks are putting up costs of using plastic cards overseas over the next few weeks, while others are expected to follow suit.

Halifax is increasing the charge it takes from overseas credit card purchases from 2.75 per cent of the value to 2.95 per cent. This means that for every £100 spent in a shop or restaurant, the bank will take a charge of £2.95.

The Halifax is also putting up the cash withdrawal charge with this type of card from 2.5 per cent to 3 per cent of the value.

Once a second fee is added, someone taking the equivalent of £100 out of cash machine would be charged £5.95. Most of the bank's customers will see the increase from the start of August.

Lloyds-TSB is increasing the charge on its debit cards from 2.75 per cent of the value of purchases to £2.99 per cent.

Once a second fee is added, it will cost a customer £4.99 to take £100 out of a hole-in-the wall machine

NatWest has increased the debit card charges from 2.65 per cent to 2.75 per cent. It has also increased one of two fees that apply to purchases from 75p per transaction to £1.25.

Others such as Morgan Stanley have pushed up charges to cash in on the use of cards overseas.

Eddy Weatherill, of the Independent Banking Advisory Service, said: "These fees for using cards overseas are just one of many stealth charges used by the banks,

"Generally, the charges are hidden away in the statement small print rather than being spelt out. Many people do not even know they are being charged when using their cards overseas."

The banks are redrawing the charges for plastic cards in retaliation against efforts to crack down on other unfair fees.

A year ago, the industry was told to cap credit card penalty charges, which used to be as much as £25 for missing a payment, to a maximum of £12.

Similar action is planned by the Office of Fair Trading in relation to overdraft penalty charges, which can be as much as £39 for busting a limit or bouncing a payment.

Some finance providers, such as the Nationwide building society and the Post Office, do not impose charges on the use of debit cards overseas.

The Nationwide's divisional director, Jeremy Wood, said: "People who are planning to go abroad over the next few months should be aware of the hidden charges that most card providers impose which are both costly and unnecessary."

A Society spokesman said: "Nationwide estimates that travellers wasted over £326million in unnecessary foreign loading fees on their credit card whilst abroad last year.

"Consumers should take a good look at the deal their bank is offering when travelling abroad."

A Halifax spokesman explained the increase in charges saying: "We are just making a tweak to our terms and conditions. We are writing to customers to inform them.

"We are bringing our charges into line with other providers. Customers need to look at a range of things when deciding which card they use. We have some very attractive interest rate deals."

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