Make sure you don’t get burned by exchange rates and card fees for overseas spending
Paying with expensive cards or on poor exchange rates while on your summer holiday could easily eat into your holiday budget.
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Many holidaymakers treat how to pay when they’re abroad “as an afterthought”, said MoneySavingExpert, even though “doing it wrong” can cost hundreds of pounds more in fees and exchange rates.
Getting the most out of your money by using the right type of card or finding the best currency rate for overseas cash “can make your holiday budget go further”, explained Unbiased.
Here is how to get the best out of your travel money.
Shop around for the best exchange rates
Don’t leave getting your travel money until the last minute.
Changing your cash at the airport “might be handy”, said SkyScanner, but the exchange rates are “among the worst”.
It is important to make time to shop around.
The exchange rate you get when you turn your pounds into overseas cash such as euros or dollars “can vary massively on the high street”, said TravelSuperMarket, meaning you could lose out on “signficiant sums”.
The website suggests comparing your options using tools such as as MoneySavingExpert’s TravelMoneyMax or MoneySuperMarket, where you can compare rates from different providers and pre-order cash to collect or be delivered.
If you don’t know how much cash you will spend, either set a budget or “keep your eyes peeled for a buy-back guarantee”, added Unbiased.
This locks in the exchange rate you purchased the money at and means you should be able to sell unwanted currency, typically without a fee.
Think before putting it on plastic
Never “blindly” use your debit or credit card when spending overseas, warned MoneySavingExpert, as there may be overseas transactions fees.
Using the wrong card “could see you stung by almost 5% in fees and charges”, said MoneyWeek, putting a big dent in your holiday budget.
Most banks will “slap on” around 3% to your transactions made abroad when using your debit card, the financial website said, rising to almost 5% if you want to withdraw cash from an ATM.
There are some dedicated travel debit or credit cards that come with zero fees such as from Halifax, NatWest and Virgin Money. They may even have a competitive exchange rate, “meaning your money will go further”, added MoneyWeek, and some will even give you cashback .
Some providers including Monzo and Starling offer fee-free international payments on their standard debit cards.
Alternatively, added Unbiased, a prepaid currency card – that you load up with cash based on your budget before you leave – can be used “in the same way as a credit or debit card, in your chosen currency”.
Prepaid cards are offered by brands such as Revolut, Wise and Travelex. They are are a “great way” to keep to a budget while abroad, said SkyScanner, and help “avoid pesky overseas transaction fees”.
Just top them up with money before you leave and there’s no overdraft, the website added, so “no risk of accidentally going into debt, and you can simply top them up when you need to”.
A dedicated overseas card is “particularly good” if you are hiring a car abroad, said MoneySavingExpert. Many car hire firms won’t take a debit or prepaid card, so you will usually have to pay by credit card in a foreign currency, which “can be a substantial amount of money”.
Watch out for dynamic currency conversion
Shops and restaurants may offer to let you pay in your home currency rather than the local one. This is known as dynamic currency conversion and may sound convenient.
However, it can “bump up your bill”, warned The Money Edit, adding around 5% to your spending as the retailer sets the exchange rate.
Paying in the local currency rather than trying to work out the exchange rate “almost always” works out cheaper, said SkyScanner, because Visa or Mastercard set the exchange rate.
Always choose paying in local currency if using an overseas card, said MoneySavingExpert, as the exchange rate is “unbeatable”.
It is more “touch and go” if using a “bog-standard” credit or debit card, the financial website added. If the non-sterling cash fee is under 2.5%, “go with pounds”. But, MoneySavingExpert said, if it is over that figure “pick the local currency”.
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Marc Shoffman is an award-winning freelance journalist, specialising in business, property and personal finance. He has a master’s degree in financial journalism from City University and has previously written for FT Adviser, This Is Money, the Mail on Sunday and MoneyWeek.
