Spending money overseas can end up costing you a fortune in fees and charges. Save your pennies by finding out what your options are before you travel with our guide.
Going on holiday is great, but how can you get the best exchange rate when it comes to foreign currency? Getting a good deal is far from straightforward as you’re hit with inflated airport rates and charges for using your bank card abroad.
But if you know what you’re doing, you can slash the cost of foreign currency and make sure you’re getting the best possible deal on your holiday spending. Here’s what you need to know:
Cash: Take foreign currency but make sure to budget correctly, or you will be left with no money by the end of your trip. Ensure you find the best deal before leaving to avoid buying currency at airport exchanges where the charges are high, and rates are poor.
Credit card or debit card: Take your credit or debit card abroad, but watch out for foreign usage charges and your cards getting blocked by your provider. Some banks charge a daily fee that can soon stack up.
Prepaid card: These cards can be loaded with cash which you are then allowed to spend in shops or withdraw from ATMs. They only let you spend the money you have put on the card, so there’s no risk of getting into debt.
Traveller’s cheques: These can be converted into foreign currency in specific locations abroad. You will need to sign and provide an ID to do this. Traveller’s cheques are becoming rarer, making it increasingly hard to find someone who will exchange them for cash.
Cash is the easiest way to start spending when you get to your destination.
It can be used anywhere
It is easy to manage
There are no foreign usage fees
It’s expensive to exchange abroad
It can be lost or stolen
High-value notes can be refused
Most providers will charge you for every transaction you make overseas, but you can find credit or debit cards that will cut the cost of your spending abroad.
It includes chip and pin protection
It’s easy to cancel if stolen
It can be free to use abroad
Overseas use can be charged
You can accidentally become overdrawn
The card can get blocked by your provider
You can deal with the bill later
It can be free to use abroad*
It has Section 75 protection
It’s expensive to withdraw cash
You can go over your credit limit
Your provider can block the card
The cost of using bank cards overseas depends on your card type and the bank’s terms and conditions.
This table shows some of the typical fees you could face when using a debit card or credit card overseas:
|Costs||Debit Card||Credit Card|
|Card transaction fee||0% - 2.99%||0% - 2.99%|
|Cash withdrawal fee||0% - 2.75%||0% - 5%|
|Cash withdrawal interest||n/a||6.5% - 69.9%|
The fees might seem small in the example above, but they can soon mount.
For example, the table below shows the costs you could incur with an exchange rate of £0.73=€1, a card transaction fee of 2.99% and a cash withdrawal fee of 2.75%.
|Debit card||Conversion (€250)||Charge||Overall cost|
|Card transaction fee (2.99%)||£182.50||£5.46||£187.96|
|Cash withdrawal fee (2.75%)||£182.50||£5.02||£187.52|
This example shows that just two transactions abroad can cost you as much as £10.48 extra unless you shop around and find a debit card which offers lower or non-existent charges for usage abroad.
This example shows an exchange rate of £0.73=€1, a card transaction fee of 2.99% and a cash withdrawal fee of 5%.
|Credit card||Conversion (€250)||Charge||Overall cost|
|Card transaction fee (2.99%)||£182.50||£5.46||£187.96|
|Cash withdrawal fee(5%)||£182.50||£9.13||£191.63|
In this example, the two transactions can cost you £14.59, but you can find a credit card that does not charge for card transactions abroad, saving you the £5.46 cost above. If you use your credit card for spending and avoid cash withdrawals, you could eliminate these costs altogether.
On top of the cash withdrawal fee, you will also need to pay interest on the cash you withdraw using your credit card.
This table shows how much you will be charged over 10, 20 and 30 days if you withdraw €250 (£182.50) abroad:
|Cost (€250)||10 days||20 days||30 days|
Avoid using a credit card abroad if you plan on making cash withdrawals due to the excessive charges that come with them.
You can use a prepaid card in a similar way to a credit card, except you need to top up the account with funds before you can use them, rather than spending money and paying it off later.
There are two types of prepaid cards:
Standard prepaid cards are designed to be used in the UK, but you can also use them abroad for cash withdrawals and card transactions. You are charged at the exchange rate each time you use these cards abroad.
Travel prepaid cards, or currency cards, are loaded with a foreign currency instead of sterling, which means you are charged a single exchange rate at the point of topping up the card, rather than every time you use the card.
The advantages of prepaid cards are as follows:
They can be used worldwide
They can be cheap to use abroad
You can budget more easily by only adding what you want to spend
The disadvantages include:
There are sometimes charges for loading the card
You can only spend what is on the card
There may be application fees
Some prepaid cards can come with several potential fees:
|Costs||Standard prepaid card||Travel prepaid card|
|Card fee||£0 - £15||£0 - £50|
|Load fees||0% - 5%||0% - 2.85%|
|Card transaction fee||0% - 5.75%||0% - 5.75%|
|Cash withdrawal fee||0% - 5.75%||0% - 5.75%|
When you use a cash machine with a prepaid card, the provider may charge you further fees and limit your withdrawal amount.
For example, a €250 cash withdrawal and a €250 card transaction on a prepaid card that charges 5.75% for both transactions will result in a £10.49 charge for each*.
* Based on an exchange rate of £0.73=€1
While traveller’s cheques aren’t nearly as common as they once were, you can still get them from the post office or a bank. A traveller’s cheque works by converting sterling into a foreign currency and can be cashed when you’re abroad.
When you buy traveller’s cheques, be careful to avoid any unnecessary charges. For example, if you purchase your traveller’s cheques using a credit card, you will be charged both by your credit card provider for a cash withdrawal and by the traveller’s cheque provider too.
There is usually no charge for using your debit card to pay for a traveller’s cheque but double-check before completing your order.
It’s a secure way to take money abroad
They’re easy to cancel if lost or stolen
A replacement is usually sent within 24 hours
They cannot be exchanged everywhere
There’s no access to emergency cash if they’re lost or stolen
If they’re not signed, they can be used if stolen
When you get them, you must sign your traveller’s cheques or risk someone fraudulently signing and using them.
Traveller’s cheques are provided by many travel money companies in association with American Express. This means that you will need to find an American Express foreign exchange kiosk abroad to cash in your traveller’s cheques or see if your hotels will cash them in for you.
Use the American Express Travellers Cheques website to search for kiosk locations.