Cash or card? Which cards? What about exchange rates? Knowing the best way to spend money abroad can be a minefield. That’s why our experienced financial expert Michael Barton (who lives outside of the UK for 9 months of the year), outlines all you need to know, right here…
Whether you’re travelling abroad on a family holiday or on business, spending money on foreign shores can be confusing. If you don’t make wise choices, it can also be costly.
As if getting the best foreign exchange rate for your money isn’t challenging enough, you’ve also got to consider transaction fees and commissions.
Then there are the horror stories of pickpockets praying on tourists – and what happens if you are stranded with no cards or cash?
I split my time between the UK and Europe. As you can imagine, I’ve learned a lot about the best way to spend money abroad. In this article, I’ll share my experiences and look at the most cost-effective and safe ways to spend your money overseas.
The best way to spend money abroad is to use digital banking cards that allow you to keep balances in foreign currencies. Among the best are Revolut and Wise. Both offer free accounts and market-leading exchange rates, with low/no fees on spending and ATM withdrawals.
For major purchases, you should consider using a credit card for the extra protection it offers.
Whatever card you use, always make sure that you select to make payment in local currency.
Be prepared for emergencies, too – and always carry just enough cash with you. Don’t get that cash from the foreign exchange in the airport!
Myriad Money Options For Travellers
Many moons ago, we had travellers cheques or the bureau de change. Thankfully, the world has progressed. Now you can take cash abroad, use your credit and debit cards, or opt for pre-paid cards.
The trick is to be savvy about which spending option you choose. I use a combination, because being smart with my foreign spending selection saves me hundreds of pounds each year. As I discuss the pros and cons of each option, you’ll understand why.
Cash Can Be King, But There Is A Downside
When it comes to spending abroad, cash can be king. It’s great for rewarding waiting staff in restaurants, who often don’t see tips given on cards. In those traditional street markets, it’s certainly easier to get a cheaper price if you are paying in cash (always barter!).
However, there is also a dark side to carrying cash.
First, carrying cash increases the risk that you’ll be robbed. It’s not only the fact that you don’t speak the language fluently that gives you away. It’s how you dress, the way you keep looking at your map or asking for directions, the food you’re ordering, and more.
If all you have is cash (and large amounts of it in your pocket), you become vulnerable to theft or loss.
Second, when you change your pounds into foreign currency, there’s always a cost. You’ll need to take care where you buy your euros or dollars to get the best rate, and don’t be swayed by ‘commission free’ deals. They can cost you a lot more than you think.
I explain more in the tips at the end of this article.
Credit Cards: Flexibility and Security
There are a few reasons for you to use credit cards while abroad:
- They protect your purchases
- You can take advantage of the interest-free period, which can help you to budget
- You don’t need to decide how much foreign currency you need before getting on the plane
- Depending on the card, you could benefit from a range of rewards when you spend
- If your card is lost or stolen, you can cancel or block spending on it immediately
I find that using a credit card is best for bigger-ticket purchases, like booking hotels, car rental, or more expensive gifts such as jewellery.
I never withdraw cash at an ATM from my credit card – you’ll often pay high withdrawal fees and be stung on the exchange rate and commission, as well as (for most credit card providers) paying interest on the cash from the moment you take it out of the hole in the wall.
The Best Credit Cards To Use Abroad
If you’re going to use a credit card while away, here’s a quick summary of the best for spending money abroad:
|118 118 Money Credit Card||No foreign transaction fees abroad; no annual fee||3% fee on cash withdrawals|
|Aqua Advance||No annual fee; a mobile app to monitor spending||Higher interest rates than most; and a 5% fee to withdraw cash (with a minimum of £4)|
|Barclaycard Rewards Credit Card||Some great rewards like cashback on purchases; no annual fee; and no fees for withdrawing cash abroad||Interest on cash withdrawals|
|Halifax Clarity||No annual fee; £20 cashback on first purchase; no fees on spending or ATM withdrawals abroad||You only get the cashback if you make the purchase within 90 days, and it is paid to you after 180 days|
|Santander All in One Credit Card||0% interest on purchases for 15 months from the date you open your credit card; No FX fees on spending abroad; 0.5% cashback on all purchases||£3 monthly fee; 3% fee to withdraw cash (with a minimum of £3)|
|Virgin Money Travel Credit Card||No annual fees; 0% on purchase for 9 months from date of opening; a range of rewards including discounts on some bookings||3% fee for ATM withdrawals|
Debit Cards for Emergencies Only
It’s convenient to make purchases and withdraw cash using your debit card abroad. This doesn’t mean it’s wise to do so, though:
- You’ll pay higher fees than charged by credit cards
- You don’t get the same level of protection as you do when using credit cards
- The net exchange rate does not compare favourably
I only use my debit card abroad for emergency situations, and always select to pay in local currency.
Digital Banking Cards for Pre-Paid Convenience
Using pre-paid cards is my favourite way to spend money abroad.
They combine the convenience of debit cards with the ease of online banking and much of the flexibility of credit cards. Some give rewards on your spending, and most pay the best foreign exchange rates with no or low fees.
You can withdraw cash from an ATM, and switch your money between different currency accounts easily through online apps (though some only allow you to have a Sterling account).
On the downside, I’ve known some hotels (and petrol stations) to ringfence more than the amount they charge you. For example, a night’s stay in a hotel may cost €100, but the hotelier will ringfence, say, €250 in case you spend more in the hotel.
That could cause a problem if you haven’t loaded your card with enough cash. (Another reason I prefer to use my credit card for this type of spending abroad.)
The Best Digital Banking Cards to Use Abroad
Here’s a summary of what I consider to be the best digital banking for spending money abroad:
|Bank||Account Fees||Rewards||Different Currencies||Free Cash Withdrawals||FX considerations|
|Caxton||No||No||Yes||Yes, though some ATMs may charge. £300 daily limit||Exchange rate is around 3% lower than Interbank rates|
|Chase Bank||No||Up to 1% cashback on first 12 months’ spending||No||Yes, though some ATMs may charge. £300 daily limit||Mastercard Exchange Rate, but with no fees.|
|Monzo||No, but they do offer premium accounts for monthly fees||Yes, increasing with premium accounts||No||Yes, up to £250 in any 30 days (£200 outside EEA). 3% charge thereafter.||Mastercard Exchange Rate, but with no fees.|
|Revolut||No, but they do offer premium accounts for monthly fees||Yes, increasing with premium accounts||Yes||Yes, up to £200 per month, 2% charge thereafter||Interbank Rate – the ‘real rate’ and about 0.4% better than the Mastercard Exchange Rate|
|Starling||No||No||Yes, a euro account function for use in Europe||Yes, though some ATMs may charge.||Mastercard Exchange Rate|
|Wise||No||No||Yes||Yes – two per month up to £200. 1.75% thereafter.||Interbank|
You might also like to read our review of Revolut v Monzo for a direct comparison.
A Curve Ball Solution
By now, you’re probably thinking about how many cards and how much cash to carry around with you. The Curve Card removes this stress. Like an ‘all-in-one’ solution, it allows you to link all your accounts to a single card.
Then, all you do is decide which card you will put your spending on – and if you make a wrong choice, you can ‘go back in time’ up to 120 days and switch payments from one account to another.
When you’re overseas, you benefit from:
- Fee-free spending – up to £1,000 every 30 days (2% thereafter)
- Free ATM withdrawals of up to £200 per month (2% thereafter)
- Currency exchange in the app at Interbank rates
Curve also offers premium accounts costing up to £14.99 per month. With these you can get cashback (paid as points) from certain retailers in the UK, and various insurance products (including worldwide travel insurance) among other rewards.
8 Tips for Spending Money Abroad
Now we’ve looked at the different ways to spend money abroad, I want to share my top tips to save you money and stress when spending money on foreign soil.
1. Beware of Foreign Exchange ‘Offers’
If you are thinking of exchanging your pounds for foreign currency before you get on your flight, be prepared to be ripped off – and don’t get scammed by special offers.
While I’m writing this, I did a quick comparison of exchange rates. If you’re buying euros, the rates you’ll receive range from as low as €1.0246 to as high as €1.1362. This compares with the Interbank rate at the time of €1.1615.
Now, the €1.0256 rate is accompanied by a special ‘no-commission’ offer from Hays Travel. Here’s how that no-commission offer compares to, say, transferring sterling to euros on a Wise account:
- Hays Travel: £1,000 buys you €1025.60
- Wise: £1,000 buys you €1161.50 (though there is a small charge of around 0.4% (£4) to switch this to your euro account in Wise)
You’ll be €135.90 (less that pesky 0.4%) better off by ignoring the no-commission offer and going with an Interbank rate at a digital bank!
It gets even worse for you if you want to exchange your euros for pounds when you arrive home. The foreign exchange dealer will buy back your euros at a higher rate of exchange, and you’ll lose out again.
2. Never Change Your Money in the Airport
Those foreign exchange kiosks in airports (and on ferries) are little gold mines. You’ll find some of the worst exchange rates in the world in airports. My advice? Don’t even think about it!
3. Always Select the Local Currency Option
Wherever you are using your debit credit card while abroad, always make sure to select the local currency option. If you pay in sterling, the terminal provider will use a predetermined currency rate. It’s not going to be in your favour.
By selecting the local currency option, the exchange rate will be that of your bank – usually the Interbank Rate, Mastercard Rate, or Visa Rate. As I’ve highlighted in the foreign exchange example above, this one simple habit could save you hundreds of pounds in unnecessary fees.
4. Withdrawing Cash? Choose a Local Bank ATM
In recent years, despite the incredible popularity of contactless payments accelerated by Covid, I’ve noticed an explosion of independent ATMs. I used one once, when I was desperate for cash. What a huge mistake!
If you think that airport exchange rates and ‘commission-free’ deals are expensive, wait until you hear what happens at these independent ATMs.
My mistake cost me a £6 withdrawal fee, plus an exchange rate loss of around £14. That’s a total cost of £20 to exchange £100! Never again. Please learn from my mistake made in desperation at the time, and avoid independent ATMs like the plague!
5. Use a Digital Bank Card for Most Spending
A digital bank card works just like a debit card, with some added features and benefits.
They are easy to manage and monitor through online apps, and offer lower fees and what I like to call ‘proper’ exchange rates. You can use them in all shops, restaurants, bars, hotels, etc. that accept contactless and card payments.
Cards like Wise will take payments from the currency account it needs to, and automatically transfer funds from your sterling account if your local currency account is short of funds.
6. Sign Up for a Credit Card with Travel Rewards
I recommend you use a credit card for higher-value purchases – never to withdraw cash – because of the interest-free period before settling and the extra protection it offers over debit cards.
If you are a regular traveller, you could maximise the benefits of using a credit card for spending abroad by signing up for one that gives rewards or cashback on your travel-related spending.
Some cards give points that you can accumulate to ‘spend’ later. Others offer discounts with partner travel companies. Many provide free travel insurance.
For example, while the American Express Platinum card carries a hefty annual fee of £575, among the benefits you’ll receive:
- Complimentary Airport Lounge access in 1,400 airports worldwide
- Worldwide travel insurance for you and your family
- Up to £150 in dining credits to use in selected restaurants abroad
- Complimentary room upgrades and other benefits in a range of hotels around the world
- Discounts on car rentals
- Up to 20% off airfares with partner airlines
- 24/7 global assistance
- Points for purchases made, which can be spent on almost anything
That fee doesn’t seem quite so large now, does it?
7. Always Carry Some Cash
A little cash in your pocket is always handy. It’s easier to pay for cabs with cash. Bartering at local markets can be fun, and the notes in your pocket could save you some not insubstantial amount.
You also never know if a restaurant or bar will only accept cash. It’s easier to give the kids a daily allowance in cash.
Decide how much cash you will carry with you, and withdraw it from your digital banking card at the first local bank ATM you see.
8. Be Prepared to Cancel Your Cards in an Emergency!
Using credit, debit, and digital banking cards is safer than spending cash. If you lose your cards or have them stolen, you can block or cancel them with a quick phone call or click of a few keys on your mobile phone. The big question, then, is this:
Do you know your card details, and how to cancel your cards?
Neither do I. So I have the relevant details stored safely. That’s a weight off my mind, allowing me to travel with even less stress!
Be Strategic When Spending Money Abroad
Managing and maximising your money when you’re travelling abroad shouldn’t be stressful. With the right approach, you can spend less, be safer, and enjoy your time abroad without the worry.
You simply need to be a little strategic about your spending. Here’s a brief roundup that will help you be savvy when spending abroad:
- Don’t rely on one single method of payment. It’s best to carry a mix of cash, credit cards, debit cards, and pre-paid cards.
- Use digital banking cards for everyday spending. These will help you to manage your budget, get the best exchange rates, and avoid unnecessary fees.
- Carry just the right amount of cash to pay for small-ticket items, bartering at markets, and leaving a tip for excellent service.
- Avoid taking cash out of independent ATMs (use local bank ATMs), and avoid exchanging money at airports or when ‘too-good-to-miss’ money exchange deals are being promoted.
- Use a credit card if you are making a major purchase to benefit from greater protection and help your cash flow (but don’t forget to pay your balance off before the interest-free period ends).
- Only use debit cards in emergencies. Remember that you’ll be paying higher fees when you do.
- Remember the golden rule: always opt to pay in local currency when you use any card.
- Be prepared for emergencies. Though theft and loss of cards is rare, have a plan ready to act quickly should the unthinkable happen.
This strategic approach saves me an incredible amount each year. It means I am never left embarrassed (for example, when a café doesn’t accept card payments) and I’m always financially prepared while I’m away with the family or on business.
For that extra fillip to your finances, when you buy bigger-ticket items, use credit cards that reward you for being an account holder ─ giving you free travel insurance or discounts on travel and hotels, or offering cashback on spending.