We don’t need to tell you the benefits of a debit card in general; it’s the most popular and convenient way to pay for goods or services in the UK. The main debit card providers are MasterCard, Visa and Maestro which are all widely accepted around the world and essentially allow transactions to be made from your current bank account. The real beauty of debits cards is that they all offer “guaranteed acceptance” which means that you can obtain a debit card regardless of your credit history. That’s why we like debit cards. Now, while the debit card is perfectly acceptable for use at home in the UK, how should we use our debit cards, if at all, when we hop off our little island?
If you opt to take your ‘flexible friend’ away with you, and leave behind the travellers’ cheques and wads of cash, it many ways this seems like a logical choice – the airport’s Bureau deChange can’t rip you off, nor can the hotel’s foreign exchange office. You feel safe knowing that you don’t have large quantities of money on your person.
Although this logic seems solid, using your debit card in another country is actually one of the more expensive ways to spend your money whilst abroad. There are numerous charges that are likely to be applied when using your debit card, which you may not be aware of until you receive your bank statement, weeks after you’ve returned home.
While withdrawing money from the ATM machines as and when you need it seems like the most sensible option, what you may not realise is that many UK banks charge an extra 2.75% on top of the true exchange rate. As well as this, a sneaky cash withdrawal fee is often added on top which is usually 1.5 – 2%, though the minimum charge is often £1.50 – £2. This is particularly painful if you are withdrawing small amounts at a time, as you could find yourself paying £2 for every £10 you withdraw.
But it doesn’t stop there…
Purchasing with your debit card
When paying for goods abroad with your debit card, for example in a retail store or in a coffee shop, you should be aware that many banks typically charge a retail exchange rate transaction fee, which is a conversion charge, often 2.75% on top of the true exchange rate. As well as this, many large banks charge a retail cash fee for all transactions, which is usually a minimum of £1 – £1.50.
To avoid the horror of seeing countless charges all over your bank statement when you arrive home, it is advisable to take travellers cheques away with you and to carry at least some cash in the local currency, even if you struggle to make sense of it. This would be especially useful if you were to find that the ATM machine had a withdrawal limit. It is better to pre-order the local currency as well as travellers cheques from your nearest travel agent in the UK, ideally two weeks before you leave. This way you are more likely to receive the best exchange rate.
If you really must use your debit card while on holiday, it is advisable that you plan ahead. Instead of withdrawing several small amounts, take out a larger sum of money to keep the charges down to a minimum. Alternatively, take a prepaid travel card with you, which you can top up yourself, and doesn’t charge you excessive amounts of money for using it.
Avoiding Other Problems
Identity theft these days is just a fact of life. It doesn’t take much for a fraudster to acquire your details and therefore, using a debit card abroad increases the likelihood of this happening – as you’re in a strange place and unfamiliar territory. Tourists are often targeted because they are easily distracted and perhaps unaware of culture norms. It is imperative that you keep checking your bank statements several months after your vacation to ensure that there are no unexplained quantities of money coming out of your account. Keep in mind that a debit card offer less protection than a credit card.
To avoid your account being frozen, make sure you call your bank in advance to inform them when you will be away, where you will be, and how long you will be away for.