HUNDREDS of thousands of holidaymakers face having their credit cards rejected by shops, bars and restaurants this summer as card companies engage in an unprecedented crackdown against fraud, writes Nic Cicutti.
Evidence is mounting of a record number of transactions being turned down by card machines across continental Europe in a bid to stamp down on fraudulent use abroad.
Problems in obtaining credit while abroad come as UK holidaymakers look set to wi
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thdraw a record £7bn from overseas cash machines this year and spend up to £5bn more with their cards during on a foreign break.
Credit card companies deny they are taking part in a coordinated campaign where suspect card use is being rejected. They say such decisions are always at the discretion of individual issuers.
A spokesman at the Apacs, the banks' payment system trade body, says: "We know of no collective strategy to clamp down on card usage abroad. All we can surmise is that issuers are looking at people's transactions and making decisions based on what they see happening in each individual case."
However, in one recent example, dozens of Lambretta scooter riders travelling to a rally in Sweden last week found that their cards were being rejected by petrol stations, restaurants and shops there and in Denmark. In many cases, several cards were turned down in succession, leaving their owners to borrow cash off friends in order to continue their journey.
One rider who attended the event said: "It was incredible. I was in a group of about 10 riders and the further we went on the more people were having their cards rejected at service stations. By the end, almost everyone in our little group had several pieces of useless plastic in their wallets. When we got to the main campsite we discovered lots of others with the same experience."
Despite the introduction of Chip and Pin cards, which were meant to make life much more difficult for criminals, total losses from card fraud while abroad grew by more than 85% in 2007 to £207m. At £532m, total fraud is higher than it has ever been.
The most important growth in fraud has come from overseas. The main reason for this is that not all EU countries (or the US) operate a Chip and Pin system. This means it is possible for criminals to skim your card and counterfeit it by making the old-style magnetic stripe on it.
The card can then be used abroad, especially in Italy, Australia and the US, which have no plans to implement Chip and Pin.
A spokesman at Barclaycard denies that his company is targeting holidaymakers. "That's the very last thing we want to do," he says. "What is happening, however, is that our security systems are becoming increasingly sophisticated an identifying patterns of suspicious transactions.
"Clearly, if in one week you have been using your credit card to do the shopping in a certain supermarket and the next you are in Sweden, paying for petrol several times over in one day, that will be totally different spending pattern and our systems will pick up on that."
The spokesman adds that Barclaycard is to start asking its cardholders to inform the company of when they are planning to go away, where and how long for. In addition, cardholders are being asked to supply a contact number where they can be reached in order for its staff to clarify any potentially dubious transactions before they are accepted or rejected.
Having your card rejected is not the only danger for holidaymakers. Even if a card is accepted, research suggests many could be paying through the nose for the privilege.
The financial website MoneyExpert.com says the cost of withdrawing cash abroad can vary dramatically between providers. With an average cash withdrawal abroad of £103, debit card holders will pay on average an additional £4.12 in charges, and credit card holders £4.33.
Sean Gardner of MoneyExpert.com says: "Withdrawing cash from an ATM or over the counter whilst abroad can be the most convenient way of getting hold of your money. It's also safe and simple. However, most people will have to pay for the privilege and some will pay considerably more than others."
The consumer group Which? says people making purchases on their debit or credit card abroad could face fees of more than £20 if they spend £500 on holiday. Most cards add a foreign exchange loading fee of 2.75%, and debit cards usually add a handling fee for each purchase.
Which? says the best options are Nationwide's debit card, while credit cards from Abbey, Nationwide, the Post Office, Saga or Thomas Cook don't add fees for overseas spending.
How to play your cards right when you go abroad
Before you go overseas:
• Only take cards with you that you intend to use.
• Take your card company's 24-hour phone number with you. Tell the issuer you are going abroad.
• Make sure your card company has your latest contact details.
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