Overseas credit card costs affected by market

By UK CreditCards.com

Sterling drops againPeople using their credit cards abroad in the coming months could face increasing costs due to a new weakening in the pound.

Sterling has been under pressure on the currency markets recently, with investors fearful that the UK might not be weathering the downturn as well as other nations.

The pound fell to under €1.14 against the euro on Aug.26, its lowest level for three months. This has in turn made sterling-denominated UK credit card purchases in the eurozone more expensive.

Investors' actions are partly explained by recent GDP data, which showed that Britain's economy shrank by 0.8% over the second quarter of 2009. Meanwhile, the economies of Germany and France both registered 0.3% of growth in the same period.

The Bank of England has also put in place a markedly more radical monetary policy than the European Central Bank (ECB), cutting interest rates to 0.5% and embarking on a £175bn quantitative easing scheme.

Duncan Higgins, senior analyst at currency specialist and prepaid credit card provider Caxton FX, commented: "Investors sensed the gap between the Bank of England and other central banks. Whilst the UK are extending their monetary policies, the ECB are winding down measures to stimulate their economies."ADNFCR-2308-ID-19332388-ADNFCR

Published: 31 August 2009