Whether you are withdrawing cash from an Automated Mobile Machine or shopping for souvenirs, there are ways to save yourself from excessive bank charges when you use your credit card or debit card abroad during the Christmas, New Year and other holidays.
Paying for lunch abroad could attract a currency conversion charge on your card.
Financial data provider, Moneyfacts, says some debit cards will charge as high as £9.50 (or its naira equivalent) for a £200 withdrawal from an overseas ATM, while some credit cards will charge almost £12 a time for the same transaction.
Research has shown that some credit cards would be even more pricey, charging almost £16 for someone to withdraw £200 in cash, before interest applies. This interest depends on what Nigerian banks charge their customer. The charge may vary as well.
Moneyfacts says the “sometimes excessive” charges incurred abroad can lead to a costly headache, and some people with high-charging plastic may feel they can’t be bothered to take out a credit card or open a current account to avoid these fees, but others – particularly those who go abroad regularly – may take the view that now is the perfect time to switch to a cheaper alternative.
One of the big problems for consumers is that the fees and charges for using plastic abroad are often head-scratchingly complex.
However, they are an unnecessary expense because there are fee-free cards specifically designed for use overseas.
According to www.theguardian.com, here are ways to save yourself from excessive charges.
Most people using their debit cards to withdraw cash from a foreign ATM will typically be charged 2.75 per cent or 2.99 per cent of the money in hidden commission in line with global standards. This may slightly differs in Nigerian banks.
On top of that, there is often a separate ATM fee, which is sometimes expressed as a percentage of the amount taken out. Adding up these fees shows that a current accountholder would typically pay from £7 (or its naira equivalent) for withdrawing £200 from a foreign ATM in Europe, for example.
Banks who issue credit cards also impose both a currency conversion fee and an ATM fee, although perhaps not surprisingly some cards cost more than others.
For holidaymakers from Nigeria who find themselves in Europe, HSBC is fairly typical in charging a standard credit cardholder £11.96 (or naira equivalent) to withdraw £200. However, some banks charge more. Some banks’ debit cards come with an extra sting in the tail in the form of a purchase fee, slapped on when you use the card in a shop or restaurant overseas.
How to cut costs
There are a number of cards out there that won’t charge you a penny in foreign exchange loading fees or other bank charges when you use them in shops, hotels and restaurants, or to withdraw money from cash machines.
Some Nigerian banks apply MasterCard’s exchange rate at the time you make the transaction and don’t’ add any “loading” fees or charges. Be aware, though, that there is no interest-free period on cash withdrawals made with some banks’ cards.
Pre-paid cards are another option for people who want to budget on holiday or avoid taking cash, according to experts.
They say consumers can load their spending allowance onto the card and feel safe in the knowledge that if they lose the card, it can be replaced without any loss of money.
There are even pre-paid cards that do not charge for ATM cash withdrawals. For example, my Travel Cash’s Euro currency card has no ATM fees in Europe. It is free to order with a minimum load of €30.
Holiday mistakes that can cost you
If you’ve been daydreaming about a lazy day on the beach, you’re in good company. The cost of going on Yuletide vacation overseas has gone up due to inflation in Nigeria, and rising airfares, among other costs abroad. Vacation travels are up by 17 per cent, with more than two-thirds of Americans planning to take vacation, according to American Express’ Spending & Saving Tracker. But while a little rest and relaxation may do your body good, one vacation planning mistake could set your finances back for months to come.
A lot of travellers unintentionally spend more money than they have to, says Jessica Galbraith, author of ‘50 Things to Know to Travel on a Budget:
Tips from Experienced Travelers.’
No matter how much fun you have while you’re away, here are some common vacation-planning money mistakes that can add to your stress level once you get back home, according to creditcards.com.
Taking a buy-now, pay-later approach
It’s easy to get caught up in everyday life and forget to save in advance for a vacation. Next thing you know, all your friends are talking about a trip to Europe, United States or the Caribbean and you feel tempted to reach for a loan. But before you do that, consider the long-term consequences. If you take a N1m loan for vacation at 18 per cent interest rate and make the minimum monthly payments, it will take you a long time to pay for that trip, says Mike LeClear, director of financial counselors for FinancialHope Counseling and Education of Northeastern Indiana. No vacation is worth that much. Consider planning a staycation near your home instead.
Saying ‘no’ to free money
Nearly three-quarters of holidaymakers who have frequent flier miles don’t know how many they have and more than half don’t know how their frequent flier programmes work, according to a survey conducted by The Points Guy blog and The Princeton Group. Miles and travel rewards points are worth money. Not only may you have enough miles to get a free plane ticket or one-night hotel stay, but if you understand how the programme works, you may be able to increase your vacation savings throughout the year by making certain types of purchases on your travel reward credit cards.
Failing to plan for the unexpected
Anything can ruin your travel plans. You can get appendicitis in a foreign country, have to cut your trip short because of a family crisis or lose your luggage at the airport. Travel insurance will cover many of these expenses, which can be quite hefty. A N20,000 travel insurance policy could save you the N250,000 it would cost to airlift you home in an emergency. Check to see what your travel insurance policy explicitly covers. For example, if you plan to engage in extreme sports on your vacation, such as bungee jumping or surfing, you may need to buy additional coverage for injuries incurred during those activities, Galbraith adds.
Paying for something you already have
Before you buy insurance coverage for your trip, make sure you aren’t buying something you already have. Nigerian banks are in partnership with some credit card issuers that offer supplemental travel insurance that pays for such things as trip cancellation and lost luggage. So check with your bank to see whether you’re covered by useful credit card or debit card insurance perks.
Also check with your health insurance provider to see if your policy covers medical emergencies while you’re away. Insurance coverage for a rental car is another expense you may be able to avoid. Many credit cards also will provide some rental car insurance coverage. However, you must rent the car with the card that offers the benefit and decline the coverage offered by the rental car company, says Sarah Pew, a spokeswoman for Visa Incorporated.
Forgetting that little things add up
The flight and hotel room may be your most substantial costs, but other expenses can break your budget if you fail to consider them. US airlines made more than $3.5bn in baggage fees in 2012, and if you’re planning to come back with a lot of heavy souvenirs, you may pay more per bag on the return trip, Galbraith points out.
Also consider costs of food, transportation and activities such as theme parks once you get to your destination, says Cristy Cash, director of counseling and education at Consumer Credit Counseling Service of Central Oklahoma. You might even be able to cut down on those costs by looking for a hotel that has a microwave or stove so you can do some of the cooking yourself, Cash adds.
Vacations can be times for fun, relaxation and warm memories — particularly when you take the money worries out of the equation.