USING your credit card while you're abroad could soon get cheaper as Visa and Mastercard cut retailers' fees on payments made by cards from outside the EU.
The so-called multilateral interchange fees (MIF), usually added to such transactions, will drop by around 40 per cent on average, the EU Commission announced today.
When a retailer in the European Economic Area (EEA) accepts a card from outside the bloc they must pay a service charge, which they then pass on to customers by hiking prices.
This means the fees are felt by anyone who wants to buy something, even if they don't use an international card.
The lower fees, which amount to 0.2 per cent on debit card payments and 0.3 per cent on credit card payments, will come into effect within the next six months and will then apply for five years and six months.
Of course, the retailers don't have to pass on the savings to customers but it's believed they will.
How can I get the best currency rates?
WE spoke with Hannah Maundrell, editor-in-chief at money.co.uk to find out how you can guarantee the best rate when you go on holiday
- Don’t buy cash at the airport – you’ll always be able to beat the rate with a bit of forward planning
- Compare travel money companies online – Factor in delivery costs and choose the option that gives you the most cash to spend on holiday. If you’ve left it until the last minute order online for airport collection so you get the best of both worlds.
- Use comparison tools – MoneySavingExpert’s TravelMoneyMax enables you to compare pick-up and pre-order rates.
- Don’t pay for travel money with a credit card – it’s likely you’ll be charged a cash withdrawal fee which adds to the cost.
- Top up a prepaid card to lock in your rate now – Choose your card and read the T&Cs carefully as some apply hefty fees. WeSwap, FairFX and Caxton FX are all worth checking out.
- Always choose to pay in the local currency rather than sterling – This will help you avoid sneaky exchange fees
Commissioner Margrethe Vestager, in charge of competition policy in the EU, said the commitments by Visa and Mastercard will "reduce the costs borne by retailers for accepting payments with cards issued outside the EEA.
"This will lead to lower prices for European retailers to do business, ultimately to the benefit of all consumers," she added.
It can be tempting to pay in pounds when you're abroad as it's easier to see exactly how much you're spending, but you'll get a better deal if you switch to the local currency.
This is because when you pay with pounds, the foreign bank, restaurant or shop can set their own conversion rate to figure out how much you owe.
These are often worse than the exchange rates set by Mastercard or Visa that your bank would normally charge you.
In fact, the difference between spending in sterling over local currency costs British tourists around £500million every year, according to travel money firm Fair FX.
Knowing the right time to buy your holiday euros can be tricky as the exchange rate goes up and down.
In the past, we've reported on how airport money exchanges continue to offer paltry rates to holidaymakers.
We've also revealed the best credit cards for holiday and spending abroad.
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