Shoppers pay dearly for using credit cards overseas

Holidaymakers buying goods or paying bills abroad with their credit card could end up paying way over the odds unless they ask to make the payment in the local currency.

Nationwide Building Society is launching a guide card for its members explaining the potential perils of Dynamic Currency Conversion (DCC) which it estimates cost those shopping abroad £5m in July last year alone.

DCC is when a retailer converts the sale price from the local currency into sterling at the time of purchase, for which it will then charge a conversion fee. If a customer pays in local currency, such as euros, the card provider handles the conversion instead.

DCC is supposed to be an optional service, which should be performed with the cardholder's consent, but often the conversion to sterling is being done automatically. By paying in local currency, Nationwide customers would avoid costly exchange and commission rates as the building society offers free card use abroad, without any conversion charges.

Nationwide says the practice of automatically applying DCC is particularly prevalent in Spain, France and Italy and it is therefore including phrases in the local languages on its guide card to help customers request to pay in the local currency.

Skipton weighs in with fee-free tracker

Skipton Building Society is offering a fee-free tracker mortgage that tracks at 0.49 per cent above the Bank of England base rate for the life of the loan. The mortgage - currently at 4.99 per cent - has no application or completion fees, no early repayment charges, comes with £150 cashback, allows for overpayments and payment holidays and is available on loans of up to 95 per cent of the value of the property.

Skipton is not the only institution trying to attract those interested in trackers. Three weeks ago Nationwide launched a lifetime tracker mortgage that allows borrowers to switch to any of its fixed-rate products at any time, penalty free, during the life of the loan.

David Hollingworth, of mortgage broker London and Country, says that while the Skipton loan is a good long-term product, there are better. 'The Nationwide tracker is at 0.39 per cent above base rate, although it does come with early redemption penalties and Norwich & Peterborough has a tracker at 4.89 per cent.'