Nationwide and Post Office change the rules on card use abroad

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This week alone Nationwide have raised their once market-leading rates and the Post Office have joined most other financial providers to make commission free spending more tricky.

What do the changes mean? And should we be worried about how much the use abroad market is contracting, especially for those without excellent credit limits?

Nationwide: what it means

As a result of changes which came into force yesterday, Nationwide debit card holders are charged a 2% fee on their card spending overseas.

Nationwide's fee-free debit card has been used by savvy travellers to save when they go away for years.

In the end, however, it was that popularity that killed the promotion.

In an effort to get Nationwide customers to use the Flexaccount as their main current account, rather than a holiday extra, the building society replaced commission free use abroad with annual European travel insurance but only for those that pay at least £750 into the account per month.

The building society says that 900,000 of its 3 million Flexaccount customers just use the account for cheap overseas spending.

Nationwide are also no doubt hoping that consumers will switch to a 'use abroad' credit card instead which, coincidentally, they also offer in the form of the Nationwide Gold: it's fee-free in Europe and charges a 1% fee elsewhere.

Post Office: what it means

The Post Office credit card's new restriction on use abroad will affect far fewer users.

The card is still free to use abroad, the new rule just closes a loophole which meant that cardholders could spend more than their credit limit while they were away by preloading the account before travelling.

Instead, they'll be restricted to their credit limit which is set at a minimum of £500.

The card's terms and conditions now say:

"You are not permitted to have a credit balance on the Account and therefore you should not make payments that would place the account in credit, as these may not be processed."

In other words, overpaying the account will lead to a bounced payment.

That's well worth bearing in mind especially if you tend to be over cautious with your credit card accounts.

Use abroad: what it means

So what do the changes mean for use abroad in general?

Lyndsey Burton, founder of Choose, said that the use abroad market had certainly been restricted by the moves.

"Neither Nationwide or the Post Office are being particularly mendacious here - although it is a real shame to see these benefits go and it will no doubt force some Nationwide customers into either using a credit card abroad or having to consider the more recent alternatives such as prepaid cards," she said.

There are disadvantages to both those options, however.

The best credit cards for travel now usually require an excellent credit history.

On the other hand, prepaid travel cards (see our guide here), not only don't give holidaymakers the flexibility of borrowing they also charge fees either for holding the card or for topping it up and when making payments.

Burton also pointed out that, though Nationwide in particular have given a lot of publicity to their change of heart, a rule change always carries the risk that some consumers will pay out in fees unwittingly.

"It's changes like these that make it just as important as ever for people to check their credit and debit card small print before they go away."