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How To Avoid Non-sterling Transaction Fees

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Last editedApr 20232 min read

With COVID-19 travel restrictions now lifted for many of our favourite holiday destinations, thousands of us are taking the opportunity to book foreign holidays for next year. But one of the most stressful and sometimes confusing aspects of travelling abroad is always keeping one eye on your finances with the added complication of exchange rates and fees.

One of the most common fees for UK travellers is the non-sterling transaction fee that is applied when using your credit card or withdrawing money from an ATM in a foreign currency. With a general societal move towards cashless payments, using your card or other contactless payment options abroad is going to become more common. With that in mind, here’s everything you’ll need to know about the non-sterling fees you might come across when using your card in a foreign country.

What is a non-sterling transaction fee?

As the name implies, a non-sterling transaction fee is a fee applied to any purchase or financial transaction made in a currency that isn’t pound sterling. This will apply when using your card in shops, restaurants and when withdrawing money from an ATM. In many instances, it will also apply when making online purchases.

In most instances, the fee will simply be added to the cost of your purchase and the cost will depend on your bank. For example, the HSBC non-sterling transaction fee is around 2.75% for debit and 2.99% for credit cards.

There is, however, often the option to convert the transaction to sterling at the point of sale. In that situation, the transaction fee is set by the individual trader but will usually fall in line with recent exchange rates as recognised by Visa or Mastercard.

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To convert or not to convert?

Whether or not you choose to pay in the foreign currency or convert the purchase to sterling will have a direct impact on the price you pay. It’s going to vary on a situational basis which is the right option.

Generally speaking, you’ll save money paying in the local currency but it will always depend on the merchant’s conversion rate and whether it compares favourably to your bank’s non-sterling transaction fee.

ATM withdrawals

Foreign ATM withdrawals will often also impose a separate fee of around 2% on all debit card withdrawals from foreign ATMs. This fee will once again depend on your bank and what agreements you currently have with them. Some banks, for example, offer premium accounts that allow you to circumvent these fees.

Avoiding non-sterling transaction fees

While it might sometimes be convenient to bite the bullet and just absorb the fee, there are workarounds available in some instances.

Stick to sterling

The obvious answer is to avoid all purchases in foreign currencies. This is a lot easier to do online as you can just search for a site that sells the item you’re looking for in sterling. However, when you’re abroad you might actually end up paying more based on the exchange rate.

Use a multi-currency card

Multi-currency bank accounts do exist for individuals and businesses that make frequent purchases in different currencies. These cards work on flat currencies and will definitely save you money if you travel a lot but might not be practical for most users.

Exchange before you travel

Exchange rates are always wavering given the current unstable economic situation. So it’s always safer to exchange currency before you travel. We would always recommend exchanging at a local bank or credit union, where possible, as they will generally offer the best rates and are less likely to charge any extra fees.

We can help

If you’re interested in finding out more about non-sterling transaction fees, or any other aspect of your business finances, then get in touch with our financial experts at GoCardless. Find out how GoCardless can help you with ad hoc payments or recurring payments.

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