Defaqto reveals the real cost of holiday spending

14 May 2018

Using a debit card for small payments (such as contactless to buy a coffee) can be VERY expensive

Organising your holiday money can be an exciting part of preparing for your trip.  However, despite only being a short hop away, UK travellers to Europe this summer could be miles off their budget when spending their holiday Euros.  Defaqto, the independent financial information business, reveals the real cost of holiday spending and how travellers can spend smartly to make their Euros go further.

Most expensive – Debit Cards

Alarmingly, Defaqto discovered that the most expensive way for travellers in Europe to spend is by using their debit cards, particularly for small payments.  Add to this, the convenience of using contactless, and Brits in Europe could very quickly find their holiday budget blown.  A daily €5 breakfast of coffee and a croissant over a fortnight could end up costing a whopping £21 in addition to the €70 spent on your breakfast.

Most cost effective – Credit Cards

Surprisingly, credit cards have emerged as the hero of holiday spending.  Credit cards can be as cheap as cash and they provide holidaymakers with consumer protection relating to anything purchased between £100 and £30,000.  An evening meal costing €25 could cost travellers between £0.31 and £0.66 when using their credit card.  In comparison, the same payment using a debit card could cost between £0.44 and £1.85. 

 

Costs of spending in Europe

Using exchange rate of £1 = €1.14036

 

Euro Spend

Cash

 

Lowest cost

 

Average cost

 

Highest cost

 

Debit Card

Credit Card

 

Debit Card

Credit Card

 

Debit Card

Credit Card

€ 5

£0.10

 

£0.09

£0.07

 

£0.65

£0.13

 

£1.50

£0.14

€ 10

£0.20

 

£0.18

£0.13

 

£0.75

£0.26

 

£1.50

£0.27

€ 25

£0.50

 

£0.44

£0.31

 

£1.06

£0.63

 

£1.85

£0.66

€ 50

£1.01

 

£0.88

£0.62

 

£1.58

£1.26

 

£2.46

£1.32

€ 100

£2.02

 

£1.75

£1.23

 

£2.70

£2.52

 

£3.66

£2.63

€ 250

£5.05

 

£4.38

£3.07

 

£6.14

£6.29

 

£7.55

£6.56

€ 500

£10.09

 

£8.77

£6.11

 

£11.87

£12.57

 

£14.11

£13.11

 

Note: These costs include all currency exchange fees, debit card and credit card fees.  The lowest costs are for those cards which apply charges – some cards do not charge.  Full details can be found in the tables below.

 

 

TRAVELLING IN EUROPE – SPENDING EXPLAINED

 

For holidaymakers in Europe this summer, there is a variety of ways that they can pay for their holidays spends.  The main four are:

1)      Debit cards

2)      Credit cards

3)      Pre-paid cards

4)      Cash

 

How cards work abroad (debit, credit and pre-paid)

  • When you pay by card or withdraw cash from an ATM abroad almost all banks charge a fee to convert from Euros to Pounds
  • The fee charged by banks for currency conversion is slightly higher than that charged by high street currency sellers (like Thomas Cook, Sainsbury’s, and Tesco etc.)
  • Some providers charge an additional fee for paying by debit card, or taking cash from an ATM

 

Debit Cards

When travelling overseas, it’s easy and convenient to use a debit card as they are accepted in most places and the money leaves your current account almost instantly.  However, this convenience comes at a price as debit cards are very costly.

  • Only 4 current account debit cards can be used for purchases without any fees at all (paying for items or services in shops or restaurants, for example)
  • Of these 4 accounts, only one is widely available and free of charge (Metro Bank); while two (Monzo, Starling Bank) are mobile app based only
  • Only 4 current account debit cards can be used to get cash from an ATM without any fee
  • Under half of all accounts (44%) don’t charge a fee for using a debit card for purchases

 

Using Debit Cards in Europe

         

As at 10 May 2018

 

Exchange Rate

1.14036

   
               

Total fees (where charged)

€5

€10

€25

€50

€100

€250

€500

Minimum

£0.09

£0.18

£0.44

£0.88

£1.75

£4.38

£8.77

Average

£0.65

£0.75

£1.06

£1.58

£2.70

£6.14

£11.87

Maximum

£1.50

£1.50

£1.85

£2.46

£3.66

£7.55

£14.11

               
               

 

 

Using ATM Machine in Europe

         
               

Total fees (where charged)

 

 

 

€50

€100

€250

€500

Minimum (where charged)

   

£0.88

£1.76

£4.39

£8.77

Average

 

 

 

£2.44

£3.65

£8.19

£14.83

Maximum

 

 

 

£3.32

£4.63

£10.75

£20.83

 

 

Credit Cards

Credit cards are an easy way of spending abroad as they are accepted by most retailers and they offer extra security on purchases costing between £100 and £30,000.  Surprisingly, they can also be cheaper than cash.  However, a word of warning…withdrawing cash from an ATM using a credit card can be eye-wateringly expensive!

 

  • One in eight credit cards (12%) don’t charge a fee for spending in Europe
  • Taking cash out of an ATM using a credit card is usually a very bad idea.  There is an additional cash withdrawal fee, and interest accumulates from the day the money is withdrawn.

 

Using Credit Cards in Europe

         

As at 10 May 2018

           
               

Total fees (where charged)

€5

€10

€25

€50

€100

€250

€500

Minimum

£0.07

£0.13

£0.31

£0.62

£1.23

£3.07

£6.14

Average

£0.13

£0.26

£0.63

£1.26

£2.52

£6.29

£12.57

Maximum

£0.14

£0.27

£0.66

£1.32

£2.63

£6.56

£13.11

 

 

Pre-paid cards

Pre-paid cards are loaded with the foreign currency of your choice so you can only ever spend the balance on the card.    You can continue to top up your balance when you’re on the go using a debit card, smartphone app or current account link.  Some pre-paid cards, such as Revolut and Loot, are virtually free to use abroad. Most pre-paid cards though have high fees, or other catches such as loading or renewal fees, and some (e.g. Asda) have very expensive non-Sterling exchange fees, and should be avoided. Also, many cards cannot be used for car hire, and customers might also have difficulties at petrol stations, where payments often cannot be pre-authorised.

  • Pre-paid cards can be the cheapest way to spend abroad but choose VERY carefully
  • MANY pre-paid cards have very poor exchange rates which act as a hidden charge
  • Of the 92 Sterling or Euro denominated pre-paid cards studied by Defaqto, only 6 have no fees for adding money, no service charges and no renewal or dormancy fees
  • Some (16 out of 92) prepaid cards charge a fee to load money onto the card from a debit card – typically 2%.  Another 6 charge a flat fee of 50p or a £1 to load money onto the card.
  • The Revolut Card is the best known and one of only three cards that can be used at no extra cost.

                            

Prepaid cards and fees (sample)

 

Provider

Product

Currency

Card Purchase Fee

Load Fee Online Debit %

Foreign Transaction Fee %

Foreign ATM Withdrawal %

Foreign ATM Withdrawal

Bread

FX Euro Prepaid Card

Euro

£0.00

0.00%

2.50%

0.00%

£2.00

FairFX

Euro Currency Card

Euro

£9.95

0.00%

1.75%

0.00%

£1.50

FairFX

Everywhere Currency Card

Sterling

£9.95

0.00%

1.40%

1.40%

£1.00

International Currency Exchange

ice Euro Travellers Cashcard

Euro

£4.75

0.00%

0.00%

0.00%

£0.00

Loot

Prepaid Card

Sterling

£0.00

0.00%

0.00%

0.00%

£0.00

Revolut

Prepaid Card

Sterling

£5.00

0.00%

0.00%

0.00%

£0.00

 

These are the only cards which allow loading by bank transfer, or online by debit card; have no loading fees, no monthly or annual service fees, no renewal fees, and no dormancy fees.

 

Cash

The other option is taking cash.  Most people like the security that comes with carrying some foreign currency, to pay for relatively small purchases such as taxi rides and drinks.   However, exchange rates and commission rates can vary (avoid the sky high airport money exchanges) and carrying large sums of money can put you at risk of theft, so you should always have a travel insurance policy which covers lost or stolen cash too.

  • People think buying Euros at home and taking them as cash is best, because currency sellers say that they don’t charge commission
  • BUT the exchange rate in the high street is around 2-3% less (it varies from day to day) than that used for credit and debit card purchases, so the cost of currency as cash or by credit card will often be about the same overall
  • Buying currency from your bank is very likely be even more expensive than the high street
  • Taking cash also carries risks if it is stolen

 

Examples of currency costs:

 

Buying Foreign Currency

   

 

As at 10 May 2018

     

 

         

High Street

Rate for £

100 Euros

500 Euros

1,000 Euros

Post Office

1.1126

na

£449.40

£892.54

Sainsburys

1.1207

£89.23

£446.15

£892.30

Thomas Cook

1.1176

£89.48

£447.39

£894.77

Tesco

1.1203

£89.26

£446.31

£892.62

Average

1.1178 

£89.32

£447.31

£893.06

         
         

Banks

Rate for £

100 Euros

500 Euros

1,000 Euros

Barclays Bank

1.0792

£92.66

£463.31

£926.61

Halifax

1.0906

£91.69

£458.46

£916.93

HSBC

1.0923

£91.55

£457.75

£915.50

Lloyds

1.0906

£91.69

£458.46

£916.93

M&S Bank

1.1149

£89.69

£448.47

£896.94

Natwest

1.0917

£91.60

£458.00

£916.00

Santander

1.0966

£91.19

£455.95

£911.91

Average

1.0937

£91.44

£457.20

£914.40

                 

 

 

Brian Brown, Head of Insight at Defaqto, comments:

“For anyone going away this summer, it’s well worth looking into your holiday money in advance to escape unnecessary fees, charges and poor exchange rates. There are a number of options available from credit and debit cards to pre-paid cards and cash, each with its own benefits.

 

“By taking a little time and care to research the market and the options available, travellers to Europe this summer could make their holiday spending go even further.  A little knowledge, such as understanding that using a credit card instead of a debit card to buy your morning coffee could save you £s, so it’s worth doing your homework well before you leave.”

 

Appendix

Current accounts with no debit card fees in Europe:

 

Provider

Product

Account Type

Debit Card Currency Fee %

Cumberland

Plus

Standard

0

Metro Bank

Personal Current Account

Standard

0

Monzo

Current Account (mobile only)

Standard

0

Starling Bank

Current Account (mobile only)

Standard

0

 

Current accounts with no ATM fees in Europe:

 

Provider

Product

Account Type

ATM Currency Fee %

Cumberland

Plus

Standard

0

Metro Bank

Personal Current Account

Standard

0

Monzo

Current Account

Standard

0 *

Nationwide

FlexPlus

Added Value

0

Starling Bank

Current Account (mobile only)

Standard

0

* Note: Monzo is free  for the first £200 of withdrawals per rolling month; thereafter a fee of 3% is charged.

 

Credit Cards with no foreign transaction fees in Europe

 

Provider

Product Name

International Charges %

Aqua

Advance Card

0.00

Aqua

Reward Credit Card

0.00

B

Credit Card

0.00

Barclaycard

Platinum Travel

0.00

Coutts & Co.

Silk Card

0.00

Halifax

Clarity Credit Card

0.00

Lloyds Bank

Avios Rewards Credit Card

0.00

Metro Bank

Personal Credit Card

0.00

Nationwide Building Society

Select Credit Card

0.00

NatWest

Reward Black Credit Card

0.00

Post Office Money

Platinum Card

0.00

Royal Bank of Scotland

Reward Black Credit Card

0.00

Santander

All in One Credit Card

0.00

Santander

World Elite Mastercard

0.00

Santander

Zero Credit Card

0.00

Tandem

Cashback Credit Card

0.00

Virgin Money

Travel Credit Card

0.00

 

Product data sourced from Defaqto Matrix database 10/05/2018

About Defaqto:

Defaqto is a financial information business, helping financial institutions and consumers make better informed decisions.

Our independent fund and product information helps banks, insurers and fund managers with designing and promoting their propositions. We analyse around 41,000 financial products in the UK. These products change on a daily basis, and our customers need help with keeping track of this.

We have been doing this for over 20 years, and have over 60 analysts spending 400 hours a day monitoring the market. They ensure that the information we provide is accurate and up to date. Our experts have done all the hard work so that financial institutions and consumers can make better informed decisions.

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