Credit Cards Watch Out When Using Your Credit Card Abroad

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Going on holiday or business to Spain, France or Italy this year? Then watch out for a new ploy to overcharge your credit or debt card.

Many restaurateurs and retailers in these countries now have the facility to get you to authorise your bill in euros but then they recharge your card in sterling. That sounds innocent but theres a sting in the tail. The retailers charge you an additional service fee of up to 4%! The system is called dynamic currency conversion (DCC).

DCC guidelines from Visa say that UK cardholders should be offered the option to either have their card charged in euros or to have the transaction changed into sterling before it goes through. It seems that in practice, few of us are being offered the alternative. Many retailers are charging us in sterling automatically - and with the extra 4% fee!

The language barrier might explain the lack of explanation but we are a little more cynical! Even where permission is sought, we doubt whether many restaurateurs or retailers will clearly spell out the additional service fee. After all its an opportunity to make a bit more profit!

Our advice is that when abroad in euro-land always ensure that your transaction is processed in euros. Thats because some UK card operators such as Nationwide, Saga and Lombard Direct will convert euros to sterling at no charge. Others, such as cards from our high street banks, will charge 2.75% as a foreign currency loading fee – but even thats less than the retailers 4% DCC.

In fact even with a 2.75% foreign currency loading fee, itll still be cheaper to use your credit card rather than converting sterling to euros before leaving the UK or converting it abroad at the bureau de change. Thats because the exchange rates applied by Visa and Mastercard are often much better than youd get for your cash and travellers cheques whilst abroad. And please dont be fooled by the commission free advertising outside the bureau de change. They might not charges commission but their currency rates are never cheap – after all, how else do they make a crust?

And another bit of helpful advice. Unless its an emergency dont be tempted to use your plastic to withdraw euros. Thats because as with all cash withdrawals, interest will be charged from the minute the euros leave the cash dispenser. Remember, theres never any interest free period on cash withdrawals.

And whilst on points to remember, please be especially vigilant about card security whilst abroad, especially if youre travelling in Eastern Europe. Card fraudsters love holidaymakers and business travellers. Thats because theyre able to enjoy a bit more time with the card before the card is blocked. Chip and pin technology has helped enormously but there are still risks to watch out for. A report we read last week serves to highlight the problem.

Mr & Mrs B were on a weeks break in Prague when Mr Bs wallet was stolen by a pickpocket. It was greatly inconvenient and not a little distressing, but they thought that their chip and pin cards would protect them. Imagine their horror when they returned to the UK, to find that within three days of losing the wallet all their debit and credit cards had been raided for thousands of pounds. How could that happen?

Its a fairly common fraud. A trained spotter had watched and recorded the pin number they used at a cash machine and a pickpocket had followed them from the machine to steal their wallet. Armed with the card and the pin number, the fraudsters were in for a field day. Thats because this couple, like 1 in 3 cardholders, used the same pin number for all their cards. Naturally, knowing the 1 in 3 statistic, the fraudsters tried the pin number they knew on all the cards in the wallet. Hey presto, bonanza time!

And yes, it does also happen in the UK.

So, two lessons here. Be particularly careful when entering your pin numbers anywhere - not only abroad. Secondly, dont use the same pin number for all your cards. Work some way o remembering them. For example, use the first, second, third and fourth digits from each of the number clusters on that card or some combination like that. Or if you have a better memory than me, memorise a pin for each card!