Martin Lewis Warns of 3% 'Hidden' Charge on Holidays
MoneySavingExpert founder Martin Lewis has issued a warning about a hidden fee that can add an extra 2.75% to 3% to every purchase made abroad. He advises holidaymakers to switch to a specialist card to avoid this charge.
How the Hidden Fee Works
In a video posted on This Morning's official TikTok account, Lewis explained that most traditional banks impose a "non-Sterling exchange rate fee" when spending internationally. This means a £100 transaction effectively becomes £103. Specialist cards, however, offer the same near-perfect exchange rates used by banks without the additional charge.
"Your bank gets a near perfect exchange rate on the day – the same as what's called the spot rate, the city market rates. When you spend on your card abroad though, normally the card company adds what's called a non-Sterling exchange rate fee of between 2.75 or 3%," Lewis said. "So your hundred pounds worth of euros cost you £103."
Specialist Cards as the Solution
Lewis recommends using specialist cards that do not have this fee. For credit card users, he highlights the Barclaycard Rewards credit card, which offers 0.25% cashback on spending both in the UK and abroad. "So you get perfect exchange rate and cashback," he noted. However, he cautioned: "Only do this if you'll pay it off in full at the end of every month, or there is interest. That will credit score you to get it."
For those preferring a debit card or wanting to avoid a hard credit check, Lewis suggests the Chase card, which requires only a soft credit check and offers near-perfect exchange rates, no ATM withdrawal fees, and cashback on domestic purchases. Alternatively, switching to First Direct provides a debit card with near-perfect exchange rates and a £175 switching incentive.
Additional Tips
A spokesperson for travel specialists Lapland Famille commented: "When spending abroad, choosing the right payment method makes a real difference. Specialist cards often work out far cheaper than standard bank cards. And if you're ever asked to pay in pounds or the local currency, always choose the local currency – paying in cash locally is another good way to avoid hidden conversion fees."
Without the hassle of switching your primary bank account, Martin's guidance demonstrates that reducing overseas spending costs could be far more straightforward than many holidaymakers realise – provided you select the appropriate card before your departure.
