Annual fee

Unless there is some particular feature offered by a certain card that you know will save you money, compared with purchasing this feature separately, avoid paying an annual fee for a card. It is completely unnecessary. Remember that all the fancy features of paid-for cards, such as concierge services and shopping discounts, are worthless unless you use them. Be particularly wary of free insurance – especially travel insurance. Make sure it meets your needs. Otherwise you could find yourself underinsured, or having to buy appropriate insurance separately.

Low usage fee

Cards that don’t charge a fee may charge you a retrospective fee if you don’t spend over a certain limit. Several cards now charge for low usage, including those from Lloyds TSB and American Express.

Late payment fee

Fees for missed or late payments have been capped at £12 unless the card company can justify charging more. You will be charged if you don't make at least the minimum payment by the due date. You can avoid accidentally incurring this charge by setting up a direct debit with the card company.

Foreign usage charge

You will be charged for using your card overseas. The standard charge is 2.75% of the transaction value, but Halifax and Bank of Scotland charge 2.95%, and LV and Goldfish charge an eye-watering 3%, costing you £30 on a £1,000 spend. If you opt for a card from Nationwide, the Abbey Zero card or the Post Office card, you pay nothing.

Cash machine charge

You will always be charged for taking money out of a cash machine with a credit card. The first charge will be a cash advance charge. You will pay interest on the money you have taken from the machine with immediate effect. You may also be charged both in the UK and abroad - by the provider of the cash machine  and, if the machine is abroad, a foreign usage charge will also be levied where one applies.

Dynamic currency conversion

Under the traditional system of paying for goods and services abroad, you pay with your credit card in the  local currency. Details of the transaction are  then forwarded through the card processing systems of Visa or Mastercard, converted into sterling on the way and billed to your account in pounds.

Dynamic currency conversion or “DCC” allows the currency exchange to be done at the point of sale. The snag is that the rate of exchange is invariably very poor and, although it may be comforting to know how much you have spent immediately, in order to help with budgeting, you can end up paying far more than if you paid in local currency and waited to know the final charge when you received your bill back home.

It will almost certainly be more expensive to pay by DCC if you have a card such as Nationwide’s, which would have waived the exchange rate loading had you paid by the traditional method.

Visa and MasterCard terms and conditions of DCC state that  the customer must be allowed to choose the currency in which to pay – either local currency or their home currency. Don’t be fobbed off by unscrupulous traders who say their computer systems make it impossible to charge you in local currency. If they don’t back down, pay in cash.

To find out more, read the CashQuestions guide to credit cards and find the most suitable one for you in Find the best deal.

CashQuestions Guide to Choosing a Credit Card

How Credit Card Interest is Charged

CashQuestions Guide to Balance Transfers

---

Tag this article :