Nationwide is to scrap its fee-free policy on foreign transactions for both its credit card and debit card VISA customers.
For some time, the building society has been one of just a handful of card providers to waive currency conversion charges when customers use their cards abroad. For this reason, its debit and credit card offerings have long been recommended to people who want to withdraw money or make purchases on plastic while abroad.
However, from 1 May Nationwide will start hitting credit card customers with a foreign exchange fee when they use their plastic outside the UK or Europe, while debit card customers have until 1 June before they have to pay this charge. It is estimated that over one million customers will be affected.
The foreign exchange fee, which is charged to card providers by VISA, is currently 0.84% but will rise to 1% in July. After this time, Nationwide customers will have to pay £1 for every £100 withdrawn or spent while outside of Europe.
In addition, Nationwide’s VISA credit card customers will also have to pay the charge if they make purchases from websites based outside of Europe.
Thomas Cook, the Post Office and Abbey, through its Zero Card, all used to waive foreign exchange fees.
However, from 18 April, Thomas Cook will start charging its customers a foreign exchange fee of 2.99% and Abbey has now withdrawn its offering.
A spokeswoman for Abbey says it has pulled the deal because, in the current economic climate, customers’ priorities have changed. It has replaced the popular deal with a new 0% balance transfer credit card and also intends to re-introduce the Zero Card in May.
Until then, only the Post Office continues to spare customers foreign transaction fees when they use it overseas.
Lynsey Hallam, a spokeswoman for Nationwide, says the decision to start passing on currency conversion fees to VISA credit and debit card customers was made in order to secure the long-term sustainability of its offerings.
She adds: “We are still one of the few providers not to charge customers commission, plus we don’t employ negative payment hierarchy so payments are used to pay off the most expensive debt first. When you look at what other providers charge customers, Nationwide continues to offer an attractive proposition.”
Credit card providers charge, on average, 2.75% per transaction when customers pay for goods and services while abroad.
Sam Owens, head of credit cards at data provider Moneyfacts, says the move by Nationwide is disappointing - especially as in the past it has heavily promoted the fee-free aspect of its cards.
However, she adds: “Unlike many providers, Nationwide is covering its costs rather than making a margin on foreign transactions. It still has a competitive offering. People who want to avoid being charged this fee should look for alternatives now – unfortunately, this market wasn’t very big in the first place and now it is getting even smaller.”