Foreign Usage Fees

When you are charged a fee for using your credit card abroad, the charge is actually split into two parts. The first is the credit card network fee, and is charged by Visa or Mastercard. This is a typical charge of 0% within Europe and 1% for the rest of the world.

The second charge is the bank or credit card company fee, and this fee is charged at the company's discretion. Some credit card companies will vary this fee depending on which international region you are in, but most don't bother and just charge a standard foreign charge of 2%+.

Your bank will also make a profit on the currency differences between the buy and sell rates when they exchange your foreign purchasing into pounds sterling. Visa has standard currency conversion rates that are pretty reasonable, but credit card companies do not need to adhere to it; they are allowed to increase the conversion rate as they please, allowing them to profit accordingly.

In addition to all these fees, there are yet more when you use your card at an overseas ATM. Many credit card companies will charge you some cash advance interest or cash advance fee, even if you clear your balance in full at the end of the month. We would suggest you be wary of companies that do this, but you will find a suprisingly large number of credit card issuers operate this policy.

The Nationwide Building Society has shown that this foreign usage fee is not necessary, having chosen not to levy any additional charges on non-UK transactions using their credit cards. When we say that they do not levy any fees on foreign transactions, it means two things. Firstly, they do not charge the optional credit card company fee, described above. Secondly, Nationwide credit cards do not charge the cardholder a credit card network fee, as the building society has a policy of paying this on your behalf. This means that Nationwide credit cards really stand out when it comes to overseas usage and for this key credit card feature, would be considered the best credit cards in their class.

Although it is possible that one or two of the other credit card companies may one day follow this example, we would not expect this to happen any time soon, as relatively few people are making a fuss about it.