What's the Best Way to Spend Overseas?

by from money.co.uk, Last Updated: 12 January 2015

Spending overseas can end up being costly if you're not careful, and making sure you don't fall victim to extra bank or card charges is essential if you want your money to go further.

Couple shopping bags street

Most banks treat foreign travel as another way to make extra profit from their customers and subsequently add fees and charges that mean your money buys you less when you spend abroad - whether you pay by card or local currency.

So, while taking your usual debit or credit card on holiday may seem like the easiest choice, you could find an expensive bill waiting for you when you get back to the UK.

The same applies to travel money; change at the wrong exchange and you'll be able to buy less when you're overseas.

Before you jet off on holiday, you not only need to plan how much you can afford to spend while your away, but also consider how you'll spend it.

But what is the best way to spend your money while you're away?

Get a cheap overseas credit card

Providing you're not travelling to the middle of nowhere, using a credit card to spend while you're away can be the cheapest and safest way to manage your money overseas.

However, use the wrong type of credit card and you could find yourself paying well over the odds for anything you buy.

Rather than simply taking your existing credit card, you need to do a bit of research and find a credit card specifically tailored for use overseas.

However, a little caution is needed as some banks market travel credit cards that aren't any better for spending abroad than their standard issue option. For this reason you need to double check the charges to make sure that the card you're applying for actually represents a good deal.

The most important thing to check before applying for an overseas credit card is the International Charges that the card provider will apply (you can use the Advanced Search in our credit card comparison table to find this information).

Most credit cards will apply a load fee of around 2.75% - 3% on top of the Bank foreign exchange rate (which alone is actually quite good) for all overseas transactions; this means you'll pay more for your purchases just for paying by card. However, several overseas credit cards apply a lower fee, and some none at all.

Choosing a card without an International load fee will mean that your pounds will stretch further while you're away and that essentially everything you buy will be cheaper.

You will need to make sure that you pay in the local currency whenever you're given the option so that you avoid extra charges when you make transactions.

However, withdrawing cash on a credit card, or getting cash back while your away is still likely to be considerably more costly than changing travel money before you leave the UK so is best avoided.

You can compare the different overseas credit cards, including the different fees they charge by using our Credit Cards to Use Abroad comparison table.

Pay off the balance in full

If you decide to opt for an overseas credit card then you should ensure that you can repay all your transactions in full at the end of each month.

Fail to do so and the likelihood is that you'll be charged a hefty interest rate and undo all your good work in finding a cheap card.

Keep your overseas card for overseas spending

It's worth noting that most credit cards that give you cheap spending abroad are less competitive compared to other credit cards when used at home.

For this reason it's often worth keeping your overseas credit card exclusively for use while you're out of the UK and using a more profitable card for regular spending.

Apply in plenty of time

There's no point applying for a new credit card a couple of days before you plan to travel as it's unlikely to get to you in time.

Providing you get approved for the overseas credit card you apply for, it's likely that you'll still have to wait a couple of weeks before your new piece of plastic comes through the post.

For this reason it's a good idea to apply for a credit card that you plan to use abroad a month to six weeks before you leave for your vacation so that you can be confident that it'll arrive in time.

Take a look at our guide: How Long Does it Take to Get a Credit Card for more information.

Double check the ts and cs

Credit card providers change their terms and conditions on a regular basis so you can't just assume that a credit card that used to offer cheap spending abroad still will.

Make sure you double check that your card hasn't upped the charges 4 to 6 weeks before you plan to travel so that you have time to make a contingency plan just in case.

Let your card provider know you're going away

There's no point spending time finding a cheap credit card to use overseas only to find that you get it blocked as soon as you try to use it.

To avoid this make sure you let your card provider know when and where you plan to travel in advance so that they don't flag your genuine purchases as fraudulent transactions and put a stop on your card.

Change foreign cash

Whether you're travelling to a tourist resort or heading off the beaten track, taking some local currency in cash makes sense.

Where you get your travel money, however, can have a major bearing on what you'll actually have to spend while you're away.

No one can accurately predict how foreign currency markets will change from day to day, but what is clear is that if you don't do your research before you exchange your cash you will get significantly less for your money.

The most clear cut example of this is airport currency exchange desks. Swapping your money just before you fly, or just after you land is one of the most expensive ways to get your hands on foreign currency.

This is simply because Bureau de Change at airports have a captive customer base - those that transfer their money at the airport have left it to the last minute and don't have the opportunity to shop around for a decent rate. Simply put, they can afford to charge you more for changing your money because you don't have any other choice.

However, getting the best deal on travel money isn't as simple as going for a Bureau de Change that advertises 'commission free' rates. This oft used phrase is often used to mask poor exchange rates so don't be mislead.

Instead, you need to get quotes from several different travel money companies and go for the option that will give you most in return when you swap your Sterling.

Read our guide How to get the Best Deal on Travel Money to find out how to get the most foreign currency for your cash.

Check you're covered

While taking foreign cash gives you an easy way to spend overseas, carrying hundreds of pounds worth of currency with you is a tad risky. To protect yourself against the unforeseen you should check that your travel insurance policy provides adequate cover for travel money.

You also need to check the terms that govern travel money claims so that you make sure you play by your insurer's rules and don't end up out of pocket should the worst happen.

Don't buy currency with a card

Taking the time to shop around for the best possible exchange rate is a great way to get more currency for you pound. However, if you then use your debit or credit card to pay for the money, you could be undoing all your hard work at the last minute.

This is because, most card providers classify foreign currency purchases as international transactions, and therefore apply extra charges - even if you change your money in the UK.

Credit card providers will classify forex transactions as cash withdrawals so you're likely to incur a whole host of other charges too.

For this reason if you're changing your cash in person it's generally safest to withdraw the money from an ATM using your debit card.

However, if you're buying currency online you need to give it a little more thought. Check your debit card's terms and conditions before you carry out the transaction to find out whether you'll be charged.

Not all debit card providers will apply International Charges so use a fee free card if you have one. Otherwise use the debit card that will charge you the least for the transaction.

Consider a prepaid card

Prepaid cards are becoming a more and more popular way to spend overseas, especially as they are accepted in almost all of the same places as your credit or debit card.

You load this type of card with a set amount of money so you can budget more easily and don't have to worry that someone has access to your bank accounts if your card is lost or stolen.

Prepaid cards are notorious for charging fees for anything and everything, but if you choose a card carefully you'll be able to spend abroad without paying anything extra.

You need to choose a card that doesn't apply a fee for international ATM withdrawals or transactions and that lets you load cash for free. You'll also need to check the card purchase fee, whether any monthly maintenance fees apply and how much you'll be charged if you use the card in the UK too.

Providing you can find a card that lets you spend abroad without charge, prepaid cards can be a smart way to manage your money overseas. This is particularly the case if you don't want to apply for another credit card or bank account before you travel.

Prepaid cards are available in a selection of different currencies, including Sterling, US dollars and Euros, so you need to check which option will be best suited to where you're staying.

For help choosing the best prepaid cards for use abroad, read our guide: The Easy Way To Manage Your Money Abroad or compare the different cards currently on offer using our Use Abroad Prepaid Card comparison table.

Be wary of debit cards

In most cases shopping with your debit card overseas will be an expensive way to spend your money.

Most card providers will apply a load fee to the exchange rate, an ATM withdrawal fee and a set transaction charge.

The transaction charge alone can be often be up to 1.50 every time you use your card - as you can imagine if you used you debit card for shopping while abroad this could soon rack up. However, these fees do vary per provider meaning that some debit cards are much more user friendly than others.

Some bank accounts do come with debit cards that don't apply foreign transaction charges. So if you would prefer to spend using debit card, check your account's terms and conditions before you travel.

If you'll be charged an excessive amount then you could consider applying for a new bank account that comes with a debit card that will give you access to cheap spending overseas.

You can use the Advanced Search in our current account comparison table to find accounts that suit.

However, make sure you double check the other account features before you apply. If you're going to have to credit the account with a certain amount each month just to keep it open, or pay a monthly fee it's unlikely to be worth your while (unless the other account features make it worth switching all of your banking over).

Check out Travellers Cheques

If you don't want to carry too much cash with you on your travels then choosing Travellers Cheques could be a useful alternative.

Most Travellers Cheques are now issued by American Express and are available through the majority of forex dealers as well as the Post Office.

They can also be replaced within 24 hours if lost or stolen, as long as you have made a note of each unique serial number. American Express Travellers Cheques also come with the added promise to help should your bank card or passport be lost or stolen while you're away.

However, while Travellers Cheques can be easily exchanged in most tourist areas and city locations, if you are heading somewhere more remote you may find it difficult to cash them. 

Although the exchange rates for Travellers Cheques can vary slightly from the cash rate, your main concern should be checking whether you will be charged commission.

Commission charges on Travellers Cheques can often be anywhere up to 3% and can make them a considerably more costly choice.

You should also consider if you will need to exchange your Travellers Cheques into a third currency when you come to cash them, if this is the case then it's likely that you will have had to change currency twice and will have lost out during the exchange.

Mix & match

When it comes to spending abroad it's generally best to take a cheap credit card, prepaid card or debit card as well as at least some travel money so that you have all bases covered.

Using a cheap overseas card can be a cheap option for spending in resorts, supermarkets and bigger stores, while you're away it's still likely that you'll need a certain amount of the local currency as well for smaller transactions, such as taxi or bus fares and eating out.

Research your destination

Taking the time to research where you intend to travel before your leave is a good way to check what type of transactions might be accepted.

If you plan to visit a major tourist destination then using a credit card for the majority of your spending shouldn't pose too much of a problem. However, if you plan on backpacking around Asia using cash may be your best option.

You may also find that certain countries will only exchange certain currencies, such as US Dollars into their local currency, visit the Foreign & Commonwealth Office website for advice for each country.


My girlfriend is American so I travel to the USA reasonably frequently. I fully endorse the above comments and in particular, would recommend a pre-paid card (or two). I personally use one from the Post Office and another from FairFX.
My experiences in the USA so far have also revealed that you don't normally have to remember yet another couple of PIN numbers for your new cards. Every shop I went into just needed my signature like we used to do several years ago in the UK.
I also tend to exchange some cash before each trip, researching the best exchange rate at least a couple of weeks before I travel.
Use the internet to do your research, there are plenty of excellent tools to help you. But do research thoroughly, looking for hidden fees etc.
And a final word of advice. Once in the USA, I tend not to carry both cards and my cash around all at once. I leave one card and most of my cash at my girlfriends when I go out. This way, in the event that I lose my wallet, I still have a card and most of my cash to enjoy the rest of my holiday with.

by stevec33, 14 Mar 2012

When asked in stores do I chose to pay in u.s. dollars or sterling

by Kathytravel, 3 Mar 2014

If you have a pre-paid currency card as outlined above, you won't be asked, they are only loaded with the currency of the country you have travelled to.
If however, you have chosen to use your regular bank/credit card from home, you will need to have looked at the T's&C's of your particular card to see how the exchange rate is applied and whether or not to pay in Sterling or the foreign currency. Each card will be different and may have "hidden" charges, so be wary.

by stevec33, 3 Mar 2014
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