Holidaymakers urged to make key bank account change ahead of going away to avoid high fees
HOLIDAYMAKERS are being warned to make a key bank account change to avoid high fees when spending money abroad.
The simple move of switching current accounts ahead of your trip could slash your costs.
Financial ratings company Defaqto is warning customers that several popular current accounts still charge them for using their cards abroad.
These charges tend to fall into two categories:
- A non-sterling transaction fee – which is usually between 2.75% and 2.99%
- An ATM withdrawal fee
It means stopping off on the way to the beach and spending £5 on a drink and a bite to eat could cost you an extra £1.15 in fees.
While it might not seem much initially, multiple small daily transactions can quickly rack up sizeable costs.
For frequent travellers, opening a new account or even switching banks before their next trip could be particularly beneficial.
Several providers have eliminated these costly fees, making it free to use cash machines and debit cards overseas.
This includes current account accounts offered by Chase, First Direct, Starling Bank and Kroo.
Many of these accounts also come with additional perks.
For instance, First Direct’s 1st Account offers a £250 interest-free overdraft, while Chase provides cashback on purchases.
Several accounts also pay interest on deposits, adding further value.
Plus, new customers to First Direct can bag £175 in free cash just for switching.
Debit cards with with fee-free spending abroad
SEVERAL banks offer fee-free spending abroad when current account customers use their debit cards overseas.
First Direct, an HSBC subsidiary, is the latest big brand to axe fees for processing debit card payments in foreign currency and withdrawing cash.
It’s joined a growing list of other names.
Chase
Anyone with a Chase debit card can make payments or withdraw cash outside the UK without being charged fees.
However, there is a cash withdrawal limit of £1,500 a month.
Any purchases abroad have the current Mastercard exchange rate applied.
Meanwhile, you may be charged additional fees by local banks when using their cash machines.
You can sign up for a Chase bank account by visiting www.chase.co.uk/gb/en/.
Starling
Challenger bank Starling offers fee-free debit card withdrawals and payments made in local currency when abroad.
It also passes on Mastercard’s real exchange rate and doesn’t add anything on top.
But you can only withdraw up to £300 every day.
You can sign up for a Starling current account by visiting www.starlingbank.com/current-account/.
Monzo
Another challenger bank, Monzo, also lets customers use their debit card in certain countries abroad without applying additional fees.
It also passes Mastercard’s exchange rate directly on.
You can make unlimited fee-free cash withdrawals if you’re in the European Economic Area (EEA).
However, outside this area, you can withdraw up to £200 every 30 days for free. If you go over this amount, you are charged 3%.
Again, you can sign up for a Monzo bank account by visiting monzo.com.
Kroo Bank
Kroo offers fee-free debit card withdrawals and payments made in local currency when abroad.
Overseas ATM withdrawals are only fee-free up to £200 a month, after which you’ll need to pay a 3% fee.
You can find out more by visiting kroo.com/current-account.
CHECK FOR “ADDED VALUE” ACCOUNTS
Defaqto’s analysis of the market also found several “added value” accounts that do not charge fees abroad.
With this type of account, people pay a monthly fee in return for added benefits – these are otherwise known as packaged bank accounts.
Katie Brain, a banking expert at Defaqto said: “If you’re happy to pay a monthly charge for a bank account in exchange for things like travel insurance, then you could look into added value current accounts which don’t charge fees overseas.
“Two-thirds of all added value accounts in the UK offer no fees abroad now.”
Lloyds and Bank of Scotland are among the banks offering these types of accounts.
When weighing up added value accounts, Katie said: “It’s important to review the levels of cover offered and consider whether you will use all of the benefits included.
“If not, then these may not be the best option for you.”
Best package bank accounts
PACKAGED bank accounts usually have a monthly fee.
However, if you use them right, they can save you £100s off the cost of breakdown, travel, mobile and gadget insurance.
Here’s some examples of the best available that don’t charge transaction or cash withdrawal fees abroad.
- Virgin Money M Club: This account costs £12.50 a month and comes with free gadget insurance, worldwide family travel insurance and UK and European breakdown cover.
- Nationwide FlexPlus: This account costs £13 a month and comes with free phone insurance, worldwide family travel insurance and UK and European breakdown cover.
- Halifax Ultimate Reward: This account costs £19 a month and comes with free gadget insurance, worldwide family travel insurance, UK breakdown cover and home emergency cover.
- Club Lloyds Silver: This account costs £11.50 a month and comes with free mobile phone cover, Europe and UK family travel insurance and UK breakdown cover.
WHAT ABOUT CREDIT CARDS?
Some credit cards also charge foreign currency fees of up to 2.95% and up to 7.95%for ATM withdrawals.
But travel-free versions are great for shops and restaurants, and they offer special protections if your purchases are not up to standard.
For example, Barclaycard’s Rewards card does not charge any fees on spending or ATM withdrawals.
There is also no interest on any cash withdrawn as long as you pay it back in full when your next bill is due.
The Halifax Clarity is also a good pick as it has no charges on overseas spending.
Try to avoid withdrawing cash on a credit card, as it can damage your credit score.
Remember that overseas cash machines may charge their own fees, even if your card is fee-free, so it is a good idea to buy currency at home.
Some cards also include zero interest on purchases for a set period.
Katie added: “A credit card with a 0% purchase offer can be a good option when travelling abroad because you can spread out your holiday spending over the 0% period.”
And remember, when you pay in a foreign restaurant, bar, or shop, you might be asked whether you want the transaction to be in pounds or the local currency.
You should always click local currency because point-of-sale currency conversion rates are set by the retail outlet and they’re usually much more expensive than your bank’s.
Check out prepaid cards
THERE are other specialist cards that can give you a great exchange rate and fee-free spending and cash withdrawals when abroad.
An alternative to carrying cash or your debit card around is to get a pre-paid card.
Brands like Revolut, Wise and EasyFX all provide prepaid travel cards.
HSBC launched its Zing subsidiary in January 2024, which gives existing and non-HSBC customers access to a prepaid debit card without fees.
The card can hold up to 22 currencies and be used in more than 200 countries.
These cards allow you to put a set amount of cash on the card at a fixed exchange rate.
So if the rate is good now you can put money on your card, and it will stay that rate when you are on holiday.
But, these cards can sometimes have hidden costs and charges so be sure to read the small print.