Page last updated at 22:47 GMT, Tuesday, 9 June 2009 23:47 UK

Paying with plastic overseas

Money Talk
By Mark Bowerman
UK Cards Association

Credit cards
Simple steps can prevent problems when using plastic abroad

With summer just around the corner, many of us are looking forward to an overseas trip.

While abroad it is more than likely we will use either our debit card or credit card, or both.

Last year, we used our credit and debit cards 317 million times abroad, spending £19.9bn on purchases and taking £7.9bn out of cash machines.

As long as your card carries an international card scheme brand, such as American Express, MasterCard or Visa, you can use it at shops and cash machines around the world.

But despite the fact that cards are commonplace these days, you should still take a few simple steps to avoid problems with your plastic.

Staying safe from fraud

Being a victim of fraud is a huge inconvenience, especially if you are abroad.

You are going to be better off using your credit card for purchases - especially those over £100 - and taking cash out of cash machines with your debit card

However, following common sense precautions can help minimise your chances of being a victim.

Firstly, only take cards with you that you intend to use and leave any others in a secure place at home.

When you are overseas, never let your card out of your sight and never tell anyone your Pin number.

You should also make every effort to shield your Pin when entering it in a shop or at a cash machine.

It is also worthwhile making sure your card company has your up-to-date contact details, including a mobile number.

If they detect unusual spending on your card they may contact you to check the transactions are genuine - they could block your card from being used if they cannot get in touch with you.

Similarly, make sure you know their 24-hour telephone number, in case you need it.

Paying by card also gives you additional peace of mind - if you are unfortunate enough to be an innocent victim of card fraud, you will get your money back from your card company.

Extra protection

You also have extra protection in certain situations if you pay by credit card.

Mark Bowerman
Mark Bowerman, UK Cards Association

If you buy something worth between £100 and £30,000 and the goods are faulty or are not delivered, you have protection through section 75 of the Consumer Credit Act.

Normally the quickest and most straightforward way to get redress is to speak to the retailer concerned.

However, your card company is equally liable and you can look to get recompense from them on overseas transactions as well as those in the UK.

Charges overseas

At home we are accustomed to free card payments and cash withdrawals.

When overseas these transactions may carry a cost, and typical charges include:

• cash withdrawal fees - a charge levied by your card company, plus a fee sometimes charged by the cash machine owner

• purchase fees - a flat-rate or percentage rate charge made by your card company on debit card purchases in a shop

• foreign exchange rate commission fees - a rate your card company charges you, on top of the exchange rate.

It is always worth checking with your card company or looking at their website to see which of these fees are applicable to your cards.

As a rule of thumb, you are going to be better off using your credit card for purchases - especially those over £100 - and taking cash out of cash machines with your debit card.

Which currency?

Some shops, restaurants and cash machines abroad offer a service called "dynamic currency conversion".

You should also ensure that your card's credit limit is sufficient, especially if you plan to book hotel rooms or hire a car

This is where you are given the option of paying in the local currency or having the transaction converted into your home currency there and then, using an exchange rate set by the retailer.

Paying in sterling can be useful for knowing how much a transaction is going to cost.

But you should always make sure the exchange rate is competitive, as the rate used by the retailer may not be as good as the rate offered by your card company.

If you are in any doubt, ask for the bill in the local currency.

Reserved funds

You should also ensure that your card's credit limit is sufficient, especially if you plan to book hotel rooms or hire a car.

This is because these types of business may make a pre-authorisation on your card.

This means an amount is set aside on your credit card until such time as the particular transaction is settled - for example, when you return the hire car or check out of the hotel.

The reserved funds never actually leave your card account, but are deducted from your available credit limit.

So during this time you may have less to spend on your card than you think.

Your plastic card is a convenient, quick and easy way to pay - and by taking heed of the advice above, you can enjoy a safe and stress-free time overseas.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.

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