Four credit card problems that can ruin a holiday

By Marianne Curphey

The convenience and consumer protections credit cards offer can make them good travelling companions. However, when things go wrong, it can be harder to sort out because you are away from home.

These four credit card snags could potentially derail your holiday. Here's how to prepare for them.

1. Your card gets declined
Picture the scene -- you are at a shop on holiday buying presents and souvenirs for your family, but the cashier tells you your card has been refused. What is going on?

Card issuers have sophisticated fraud systems that look at card use, says Barclaycard spokesman Andrew Bond.

"If your card issuer sees an unusual transaction, they might put a hold on the card while they try to establish your identity," Bond says.

The computer systems of your card company are designed to look at your patterns of spending and flag suspicious transactions. It might flag transactions far away from the city you live in -- or it might flag transactions outside your normal spending patterns. You are more likely to be stopped if you are buying jewellery, electronic goods or other high-value items popular with fraudsters, for example. credit-card-problems

What to do about it: Make sure you ring your card provider before you leave to let it know that you are going on holiday and that you plan to use your card. If you are a frequent traveller and use your card regularly overseas, ask to have a note added to your file.

If your card is blocked for foreign use because you have not told your provider, you can potentially unblock it by making a phone call back to the UK, or finding an alternative way to pay. It can be expensive and inconvenient having to do that on holiday, so it is better to sort it out before you go.

Even if you inform your card provider about your travel plans, you may find that your transactions (especially if you're buying high-risk items) may get blocked anyway. You may also discover that your card provider limits the number of countries you can use your card in as a security measure.

David Black, banking specialist with Consumer Intelligence, recounts his personal experience with trying to use a card outside the UK.

"I was travelling to a number of East African countries on a tour and I told my card company in advance that I would be visiting around seven different countries and that I wanted to use my credit card when I was away," he says. "They said that I was limited to four countries as that was their card policy."

2. Your card gets stolen during your travels
Although your bank probably won't hold you liable for any charges a thief makes after stealing your bank cards, calling or contacting your bank online and getting a replacement card can eat up precious holiday time.

What to do about it: When travelling with a card, be prepared for the possibility of losing it.

"You should have three things kept in the safe in your hotel room," says Andrew Hagger, personal finance commentator at MoneyComms. "These are a photocopy of your passport, your travel insurance documents and the phone number of your credit card company."

You can find the emergency overseas contact number for your credit card company on its website or on the back of the card. This number will enable you to report a lost or stolen card.

Also, take the time to report the theft.

"Make sure you report the theft to the police and get a crime number from them," Hagger says. This documentation will help when you talk with your bank about getting refunded for the thief's transactions, or if you want to make an insurance claim.

3. You get charged fees for using your card abroad
The most important fees you need to worry about when abroad are charges for withdrawing cash from ATMs and foreign exchange fees (which are charged when you use your card to make a purchase in a foreign country).

Many card companies charge 2.75% of the purchase price as a foreign exchange fee, but it can be as high as 3%. ATM fees depend both on your card and on the company that owns the ATM.

What to do about it: Both Black and Hagger suggest choosing a card specifically for travel that does not charge foreign exchange or ATM fees. Cards that do not charge fees for overseas transactions include the Halifax Clarity card, Saga's Platinum Visa (for those over the age of 50 only) and the Post Office MasterCard.

If you want one of these cards, plan ahead.

"Give yourself a few weeks to apply for one of the fee-free cards so that it arrives in plenty of time for your holiday," Black says.

Also, keep in mind that, even if your card promises "no foreign transaction fees," you might still get hit with charges for ATM use. Even if you have a card that doesn't impose fees for ATMs, some ATM operators charge for their use, says Tom Johnson, head of online business at ICE plc, which provides prepaid cards for overseas travel.

"Be vigilant," Johnson says. "If you have to use a fee-charging ATM, plan to withdraw enough currency to last for a good few days so that you're not racking fees."

4. Dynamic currency conversion
If you're shopping, you may be given the option of paying in pounds sterling rather than euros, dollars or another local currency.

Dynamic currency conversion (DCC) allows merchants and ATMs to process card transactions in the currency of the country that issued the card. This might sound convenient -- as you know exactly how much you're paying, for example. However, the exchange rate used by the retailer may not be as favourable as that offered by your bank, and DCC typically costs between 4% and 6% of the charged amount.

What to do about it: Paying in the local currency and letting your bank set the exchange rate is nearly always more cost-effective for the customer.

"Using your card to make a purchase in the local currency is likely to be cheaper than taking the merchant's offer to pay in sterling instead," Black says.

You have the right to pay with the currency of the country you are in. In fact, there are very strict Visa and MasterCard rules that say the customer must be offered the choice and, provided with information on the exchange rate and notified if there is a commission included within that rate.

If you are in any doubt, ask to pay the bill in the local currency. Check the receipt immediately, and ask the merchant to process the transaction again if it used DCC without your permission.

See related: Common fees and how to avoid them, Credit card travel insurance could protect you from holiday nightmares

Published: 29 May 2013