How do foreign purchase fees work?
Using a ‘bog-standard’ debit card to spend in a foreign currency while abroad will often incur nightmarish fees – see Debit cards from hell for a full list of cards to watch out for. That’s why we always tell people to use a specialist travel credit card when they go away rather then their usual plastic.
There are various types of fee you may be charged on a debit card, including:
- A ‘spending penalty‘, typically of between 50p and £1.50 per transaction, which is added by some (but not all) debit cards.
- A ‘load fee’, also known ‘foreign purchase fee’ or ‘non-sterling transaction fee’, which is typically up to 3% of the transaction. This is what Spencer was charged by RBS. Usually this fee is to cover the costing of converting your transaction back into pounds from the local currency, though in this case there was no conversion as the transaction was already in pounds.
RBS and its sister bank NatWest don’t charge a spending penalty on their cards, but they do charge a 2.75% foreign purchase fee on all debit cards (with a minimum fee of £1 per transaction). Their terms and conditions state this charge applies to “payments made outside the UK (for example, purchasing goods in a shop)”, as well as any payments in a foreign currency.
Crucially, RBS has confirmed to MoneySavingExpert that payments made outside the UK incur the fee even if the transaction is in pounds. This is unusual – Bank of Scotland, Barclays, First Direct, Halifax, Lloyds, Nationwide, Sainsbury’s Bank, Santander, Tesco Bank and TSB all told us they wouldn’t charge a foreign purchase fee for a sterling transaction.