With peak holiday season almost here, it’s a good time to talk about travel money – and the cheapest ways to spend abroad.
It’s possible to save hundreds of pounds just by choosing the best way to pay when abroad. Of course, this all depends on where you go, the type of holiday you have and how many of you are going. But these are the principles I follow, and you should be able to pick and mix to fit your holiday.
I’ve first taken a look at using credit and debit cards abroad, the further down I’ve shared my tips on travel cash.
Travel credit and debit cards
I use specialist cards for overseas spending
Normal bank cards are usually really expensive to use outside the UK. Most credit and debit cards companies add a 3%-or-so markup to the exchange rate. This is often called a “load fee”. There’s also often a charge per transaction, usually another quid or so, and another charge for using a cash machine.
The cards I use don’t charge these extras. In fact they give an almost perfect exchange rate, so they’re better than using a bureau de change. Savings are potentially worth around £30 to 40 per £1,000 when compared to changing your money at the airport.
The Halifax Clarity card is the main card I use. It’s saved me a fortune, and it’s the main way I spend. However since it’s a normal credit card, I make sure I pay it off in full every month to avoid interest getting added to my spending.
I’ve also just got a Monzo, a prepaid Mastercard which also promises fee-free spending (read my full review).
I always pay in the local currency
This is an easy trick to get caught out by. You’re often asked if you want to pay in pounds or whatever the local currency is. If you chose pounds, the exchange rate will be far worse. So always choose euros, dollars or whatever it is. Just not pounds.
I take a backup card
You never know what could happen. A few years ago we travelled around South and Central America for six months. Not long into the trip I was pickpocketed, losing some cash and my essential Halifax Clarity card.
Luckily I had another card – and some cash – locked in the hostel safe, so we weren’t completely screwed. And when our friend joined us a month later, she bought over our replacement cards.
Also not everywhere takes Mastercard, so I’ll always have a Visa at hand just in case. I’ve a Nationwide Select – which also doesn’t charge fees – but is only available if you have a Nationwide bank account.
Though I use cards most of the time, it’s always handy to have cash – and there are plenty of places I’ve been where cards aren’t accepted.
I don’t take too much cash with me
It’s always difficult to know how much cash to take. I don’t want too much that I’m worried about having it on me, and I don’t want any left over at the end that’d I’d need to change back. But at the same time I don’t want to get stuck in a place where my cards aren’t accepted.
It depends too where you go. When I went to Cuba (this was in 2010 so things are likely to have changed) I took a lot more cash with me than I would if I went to France.
As a general rule I’ll always make sure I’ve enough to cover the essentials when I arrive such as transport from the airport, and then perhaps just £100 extra.
I order travel money in advance
One of the biggest mistakes people make is to leave exchanging cash until the airport. Do this and you’ll get the worst exchange rates.
Instead, order your money in advance. I use Money Saving Expert’s brilliant Travel Money Max comparison tool to find the cheapest option near me.
I live in London, so this is often at one of three or four different bureaux de changes. I can generally pre-order and then collect it the next working day. It’s cheaper to exchange cash rather than pay with a credit card.
Other options on Travel Money Max are to have the cash delivered by post, or to collect from an airport – still cheaper than walking up on the day you travel.
I’ll rarely use cash machines overseas
Most debit and credit cards are an absolute nightmare for added fees. Most UK banks will not only charge a fee between 2% and 3% for each transaction, there’s an extra fee for using a cash machine. This can easily be a couple of quid. Some charge a percentage which can work out as high as £4 per withdrawal.
These are on top of any charges you get from the local bank. We’re very lucky in the UK that we can take money out of most ATMs for free. In most countries I’ve been to that isn’t the case.
If I do need to withdraw any extra cash when abroad, I generally use one of the specialist cards mentioned above.
It’s worth noting with most specialist credit cards you do get charged interest on cash withdrawals, though this isn’t much if you pay the balance off quickly. There’s also a slight risk to your credit rating by using a credit card for cash withdrawals, though I’ve never had a problem myself.
Plus even though all these cards are “fee-free”, you might still get charged a cash machine fee by the local bank.
I pay upfront if I can
Whenever possible, I’ll pay in advance. And if I can, I choose the local currency and use my Halifax Clarity card.
This not only helps me budget as I’ll know what I’ve already spent, but it reduces the risks of cards or cash machines not working – a nightmare we faced in Uruguay and Bolivia a few years ago.