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[The Philosopher]

Chillier winds are starting to blow through holiday hot spots.

The same can also be said about the charges being levied on UK card holders using their debit cards abroad.

In a couple of months' time, the Nationwide building society is to withdraw its popular commission-free service, and charge a fee when its debit card is used abroad.

Most other current account debit cards now rack up charges each time we buy something or withdraw currency - up to £4 for every £100 spent.

And that is on top of the exchange costs and any additional fees.

Lower charge

The terms of the Nationwide Flexaccount are now being changed to reward loyal customers at the expense of those who have just opened an account to get the overseas benefits.

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"Our charge of 2% is the lowest charge in the market on a mass-market current account”

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Nationwide spokesman

There will be some free travel insurance, but commission-free withdrawals abroad are to go.

The result is that many say they will ditch their Nationwide Flexaccounts, even though the building society insists that after the changes its fees will still be lower than those of most competitors.

"Many competitors charge a higher level of 2.75%," says the Nationwide.

"Our charge of 2% is the lowest charge in the market on a mass-market current account.

"That means when a customer spends £1,000 abroad, they will be charged at least £15 less than those with other providers," it adds.

The changes

For years the Nationwide debit card has been the card holidaymakers have been advised to use. Many people got a card purely for this purpose.

Using cards abroad has costs which simply have to be paid, says Sandra Quinn Currently anyone using the building society's debit card in Europe does not have to pay a charge, though they do pay a fee of 1% outside the eurozone.

From 1 November, Nationwide will levy a 2% charge on transactions.

That is a foreign exchange fee that you will pay whenever you use your card, whether you are buying something or taking money out of cash machine.

It will also also levy a £1 cash-withdrawal fee when the card is used overseas. This will replace the current 1% currency-conversion charge levied at present.

This does not apply to the society's credit card holders.

Nationwide is keeping its overseas usage charges at 1% on purchases made outside the EU, and free within the EU.

'Subsidy'

The UK Cards Association, which represents card issuers, says Britons have tripled their use of cards abroad in the last decade.

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It may be that you are not paying your bank for the service, but they are definitely paying fees to somebody ”

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Sandra Quinn

UK Cards Association

Last year, Britons spent about £12.5bn on debit cards outside the UK, and a slightly larger amount (£12.8bn) on credit cards.

Sandra Quinn of the association says it is simply a commercial decision by banks as to which charges they should absorb, and which they decide to pass on.

"If you use your debit card in an ATM overseas, that foreign cash machine owner is definitely charging your bank for the transaction," Sandra Quinn says.

"Now it may be that you are not paying your bank for the service, but they are definitely paying fees to somebody - they have to subsidise the use from some other part of their business."

Alternatives

Seasoned card-watchers like David Black, a banking specialist with analysts Defaqto, have spotted that there are a few cheaper debit card alternatives out there.

Fees for some cards abroad can be disproportionate to the cash involved, warns James Daley of Which? "Metro Bank, which has just launched, doesn't charge any fees for overseas use of its debit card, but you have to visit a branch to open an account, and it is only based in London at the moment," says Mr Black.

"Beyond that, if you have a mortgage or investment with Santander, you can open a Zero current account which again doesn't levy any charges for use of its debit card overseas."

Some consumers travelling abroad for work or business may find credit cards or pre-loaded foreign currency cards may offer better value for making purchases abroad.

However, the Consumer Magazine Which? has detected a general trend towards both higher and hidden charges, which the banks are increasingly relying on as a source of revenue.

James Daley, editor of Money Which?, says that such fees have gradually crept up in the past 10 or 15 years and are now being used to bolster bank profits

"What's difficult for consumers is that the fees are not visible on statements," warns Mr Daley.

"There is an initial fee which may be worked into the exchange rate, then transaction fees which do appear on your statement, but you can be paying £20 or £30 more for a short trip abroad, just to get hold of your money.

"These fees just often aren't proportional," he says.

With consumer pressure on the banks at home, they may collectively feel that its easier to levy higher charges abroad.

It remains to be seen if large numbers of savvy customers cotton on, and choose to move to providers offering a better deal to overseas travellers who want cheaper access to their own money.

[Pib]

Bank fees are on the rise worldwide. There are still a good many banks out there that offer low to no fees for common banking needs, but these banks seem to be getting fewer by the day.

A person needs to shop around for the best banking deals (and credit cards) and change banks as necessary to get the best deal. This is probably going to be hard for folks who feel changing their bank is a hard thing to do---but actually, it's usually a pretty easy thing to do with just a little planning in staging the movement of funds, direct deposits, incoming payments, outgoing bill payments, etc. That is, open a new bank account and over a few weeks/months move all or most of your banking business to the new bank....then, depending on fees/benefits, cancel or use the old bank account as a backup/secondary account.

A little shopping around and planning can save a person a bunch of bank fees and maybe make them feel like they are not getting ripped-off every time they use their credit/debit card outside the home country.

[citizen33]

The OP's observations about Nationwide is old news now, but the general proposition seems valid. Some from the UK were pinning their hopes on Norwich and Peterborough Building Society, which this month is offering a deal similar to the old NW one, with no extra foreign currency loading or overseas ATM fee. However, N&P featured today on Yahoo Money as the latest example of a bank/BS applying excessive overdraft charges. I haven't had an OD in living memory, but - with my memory and perchant for moving cash between accounts - this is always a possibility and the thought of a hefty instant monthly fee was enough to make me hesitate in opening my planned new account. Actually with the news on bankers' bonuses today in the UK papers, I would love to turn my back on all the big banks but finding that mutual with socially responsible aims that still offers reasonable overseas withdrawals is surprisingly hard.

Edited January 11, 2011 by citizen33