Friday, May 8, 2009
Category:
Consolidation
According to uSwitch.com, the recession combined with the weak position of the pound in relation to other major currencies is causing holidaymakers to struggle when budgeting for their travels.
The research conducted by the price comparison site indicates that the cost of using credit and debit cards whilst overseas is increasing at a significant rate.
During the course of the year, British holidaymakers will incur a massive £754 million worth of card charges abroad, which marks a 6 percent increase on last year’s sum of £710 million. A breakdown of the former reveals that debit card fees for purchases and cash withdrawals will account for £401 million, with credit card fees amounting to £352 million. According to the research, consumers will be making 288 million card transactions worth a staggering £22.4 billion whilst out of the country this year.
At a time when many people are finding their finances tight, it comes as unfortunate news that seventeen banks now charge a fee for overseas debit card purchases – virtually double the volume 12 months earlier. With the average purchase charge at £1.13, the industry is therefore receiving an annual sum of £148 million. As a result, an increasing number of firms are likely to follow in their competitors’ footsteps.
Credit card withdrawals are generally the most costly method by which to obtain cash whilst on holiday. The expense can be attributed to card charges and the fact that consumers tend to incur a higher rate of interest on the full withdrawal from the day it is made.
Where debit cards are concerned, uSwitch advise that the most economical way to take out money whilst abroad is by means of large withdrawals as opposed to encountering withdrawal charges on countless occasions. Prior to using a debit card whilst out of the country however, charges should be investigated as they can vary from one provider to the next.
Holidaymakers that are looking to avoid credit or debit cards may wish to consider pre-paid cards whilst abroad. The two that are most well-known are those offered by the exchange specialists Caxton FX and FairFX. Pre-paid cards can be used in establishments that accept credit and debit cards and are operated on the same chip and pin basis. As per credit and debit cards, these too can be cancelled if stolen. Pre-paid cards are also similar in that they are associated with fees, albeit lower in some cases. However, savings can be made on competitive exchange rates.
Prior to making card transactions abroad, travellers should check the debit card purchase transaction fee, the exchange rate loading fee, the cash withdrawal fee, and the dynamic currency conversion.
Personal finance manager, Louise Bond, at uSwitch.com said: "With foreign card usage fees continuing to creep in the wrong direction over the last 12 months, this, coupled with crippling exchange rates means that holidaymakers will certainly be feeling the pinch this year. Having less ready cash available to fund an escape to the sun from the recessionary gloom, many consumers may resort to funding their holiday purchases purely on plastic, incurring charges to the tune of £754 million for the ‘privilege'. To avoid any unwelcome doormat surprises in their credit card or bank statements upon their return home, any consumer who holds a debit or credit card should research foreign usage charges thoroughly before they leave so they can make informed decisions about how best to manage their holiday expenditure."
"In spite of Nationwide's impending departure from the fee-free credit card market, the Post Office still does not charge fees for overseas spending and Abbey's zero card does not levy a fee for foreign purchases although this card does not become available to new customers until it is reintroduced in May. In addition, consumers should also consider prepaid cards as a cost-effective option. For example, a FairFX Euro or Dollar Prepaid Card allows consumers to spend fee-free whilst spending abroad. Initially a charge of £9.95 to purchase the card is levied, although this charge is waived if you apply through uSwitch.com."
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Homeowners who have spent up on credit cards on holiday and who have returned to juggling multiple credit card bills each month, could consider
consolidating these by means of a secured personal loan. This finance option would leave the borrower with just one, straightforward monthly repayment. The new monthly repayment could potentially be lower than existing outgoings. Keen holidaymakers may decide to put it towards topping up their holiday fund. When using a secured loan to consolidate debt, it must be remembered that consolidating your debt may increase the amount you pay back overall and extend the repayment periods of your debts.
