MILKING HOLIDAYMAKERS

Banks were accused of milking holidaymakers and business travellers to the tune of £500m a year. The cash comes from hidden charges on the use of credit and debit cards abroad. They are added each time a card is used to make a purchase or withdraw cash, giving customers a nasty shock when they return home. In some cases, a family putting a little over £1,000 on plastic during a holiday can end up paying an extra £81. The main charge is a currency conversion fee which typically amounts to 2.75% of the price of everything bought with cards, from meals and souvenirs to hotel bills. Rather than detailing the amount on statements, many banks hide it in the conversion calculation.

Then there are the extra charges for withdrawals from cash machines. On a credit card the typical fee for a £100 withdrawal is £4.75 - 2.75% in currency conversion plus a further 2% for using the machine. The debit card equivalent is normally £4.25%£100 - 2.75% for conversion plus 1.5% for using the ATM. Some banks also add yet another fee each time a debit card is used for a purchase abroad. Halifax and NatWest impose a flat-rate charge of up to £1.50 while Barclays charges an additional 1.5%. The holiday charges were branded 'naked greed' by Eddy Weatherill of the customer lobby group the Independent Banking Advisory Service.

He said, "These charges are not clear, not fair and it is about time they stopped. It is expensive enough already to use a credit card, given the extortionate interest rates imposed, but the banks use every trick in the book to squeeze more from customers. If that wasn't bad enough, many of them hide the charges away." The banks do this by carrying out their currency conversion at a worse exchange rate than was actually the case at the time the card was used. The Nationwide Building Society, which does not impose the same fees, called on others in the industry to play fair.

Chief executive Philip Williamson said, "We believe many consumers are paying unnecessarily. Our customers can use their cards on holiday without worrying about overseas usage fees. We would like to see other card providers start acting in the interests of their customers, rather than focusing on increasing profits." Research by the Nationwide shows a family using a debit card for £1,000 of purchases plus two £100 cash machine withdrawals could run up £81 in charges with the Halifax, £58.80p with NatWest and £36 with HSBC, Lloyds TSB and Barclays. On a credit card, they would pay £40.82p in charges with Barclaycard, £40.46p with a Halifax card, and £30-£ 40 with most other major banks.

British holidaymakers and travellers spend £18bn a year overseas on their cards, a figure that is rising rapidly as plastic takes over from cash and travellers' cheques. Details of the holiday extras emerged as the Commons Treasury Select Committee demanded that the major banks reveal how much they make from charges on credit cards. It has been estimated that almost half of their income comes from charges rather than from interest on outstanding balances. The MPs have also put intense pressure on the banks to offer customers clearer and more honest information. As a result, Barclaycard has decided to provide more details to its ten million customers.

This includes identifying the holiday charge, known as foreign currency loading, in an 'honesty box' on marketing material and statements. Each separate charge will also be spelt out on statements for the first time. Barclaycard claimed that its credit card was still cheaper to use than travellers cheques or foreign currency, because of the poor exchange rates with these options. Halifax confirmed that the 2.75% element of its charge was not listed separately on statements to customers. But it said the charging policy was clearly set out on marketing material and statements.

The spokesman added, "The fees charged for using plastic cards abroad reflect our costs in converting and processing the actual transactions." The anger over holiday charges comes as Ministers prepare to announce they have ruled out bringing in a cap on credit card interest rates in a consumer credit Bill to be published this autumn. The announcement from Consumer Affairs Minister Gerry Sutcliffe, will infuriate those who believe banks have been let off the hook. (Source: Mail on Sunday)