Spending While You’re Abroad – All You Need To Know (2024)

Spending overseas can work out to be expensive once you’ve factored in the various fees and interest charges, so it’s important to do your research carefully and look for the best value options before you set off.

Here’s a look at your options so you can decide which is right for you…

Overseas debit and credit cards

Some people like the solid comfort of holding cold, hard cash when they’re overseas, but many people would rather not wander around with a wallet full of cash on holiday, which is why plastic cards are so popular.

Using a credit card or debit card is a convenient and easy way to pay for day trips, restaurant bills, and other holiday expenses.

However, it’s important to choose your plastic carefully to make sure you don’t end up spending a fortune on unnecessary fees.

To give you an example, most standard debit and credit cards will charge a foreign transaction fee of around 2.75% to 2.99% every time you spend on the card. This means for every £100 you spend you could be charged £2.75 to £2.99.

If you use your card to withdraw cash, you’ll pay the foreign transaction fee as well as a cash withdrawal fee of around 2.99%. So if you withdraw £100 you’re looking at paying up to £6 in total.

On top of that, if you use a credit card for your cash withdrawals while you’re away, you’ll be charged interest from the moment you receive your cash out of the machine or over the counter – even if you pay off your balance in full that month.

This means using plastic abroad can rapidly become expensive. Fortunately, however, there are a number of debit and credit cards designed specifically for overseas use that won’t charge you such extortionate fees.

Advantages of an overseas card

The main advantage of using a debit or credit card overseas is that you won’t pay foreign transaction fees every time you spend.

While many also won’t chargefeesfor cash withdrawals, you will still usually be chargedinterest from the date of the transaction if you use a credit card. Paying off the balance in time and in full the following month won’t make any difference.

Exchange rates on these cards are also usually competitive, and some cards offer extra incentives such as cash back or family travel insurance.

Disadvantages of an overseas card

As you might expect, there are a number of points to be aware of if you are choosing an overseas card.

For a start, many overseas credit cards do not offer interest-free deals on purchases, which means it’s important to watch what you spend on your card on holiday. If you are unable to pay off your balance in full each month you will usually be charged interest.

You will also need a good credit rating to be accepted for the best deals. If your credit rating is poor, your application is more likely to be rejected.

Be aware too that some cards charge monthly or annual fees – particularly if they offer extra travel rewards or incentives – so make sure you check carefully before you sign up.

You may decide the fee represents good value, but it’s always good to check the arithmetic.

Another thing to watch out for isdynamic currency conversion. This is where the retailer converts your payment into pounds rather than keeping it in the local currency.

Unfortunately, the exchange rates applied usually offer poor value when this happens, which means you could end up paying a lot more for your purchase than you expected.

So if you are given the option, make sure you always pay in the local currency rather than in sterling.

Finally, it’s best toavoidusing your credit card to buy currency or to load money on to a prepaid card (see below) as this will be counted as a cash withdrawal and you will be charged interest immediately.

Prepaid currency cards

If you’d prefer not to use a debit or credit card on holiday, another option is to use a prepaid currency card.

With this type of card, you pre-load it with cash before you travel and then use it in the same way as a debit card. Should you need further funds when you are away, you simply top it up again – one way to do this is to transfer money over from your bank account using online banking.

Traditional prepaid cards usually allow you to load them up with either euros, US dollars or sterling, depending on your destination. If you choose sterling and use the card to spend overseas, your money will be exchanged into the local currency when you use it.

Recently, a number of cards have been launched on to the market that allow you to spend in a range of different currencies on the one card.

With digital bank Revolut, for example, you can spend for free in more than 150 currencies at the interbank exchange rate. You can exchange money for free on weekdays, providing you do not exchange more than £5,000 a month.

Alternatively, WeSwap lets you store money in ‘wallets’ in 18 different currencies. It works by allowing travellers to swap currencies directly with each other. You can save money by swapping three or seven days in advance, where fees are 1.3% or 1% respectively, or you can swap instantly and pay a 2% fee.

Advantages of a prepaid currency card

Prepaid cards can be much cheaper than using a standard credit or debit card and they are generally accepted wherever you see the Visa or Mastercard logo.

They can be a useful option if you have a poor credit rating as credit checks are not usually carried out – although there may still be an identity check. Prepaid cards can also be a good choice if you are on a budget as you can only spend what is on the card.

What’s more, because you can load up your card in advance, you have the option to do this when the exchange rate is competitive, meaning you won’t lose out if the exchange rate gets worse while you are on holiday (unless you need to top up again, of course).

Disadvantages of a prepaid currency card

Some prepaid cards still charge ATM fees or foreign transaction fees in certain situations – although these are usually much cheaper than with a standard debit or credit card.

You should also watch out for application fees, top-up fees, replacement card fees, and inactivity charges if you haven’t used your card for a number of months.

Be aware too that prepaid cards are not always accepted by car hire companies, petrol stations and hotels.

Get the best deal on your foreign currency

As well as taking plastic abroad, it can also be worth bringing some foreign currency with you. Having cash to hand gives you flexibility and means you can pay for taxi fares and tips, or shop at retailers or markets that do not accept cards.

And don’t forget a 1 euro coin to release a luggage trolley at the airport!

If you do plan to take cash with you, make sure you order in advance to get the best rates. The most competitive offers are usually found online, and it will be cheaper to collect your money from the foreign exchange bureau itself rather than having it delivered.

If you prefer to have your cash delivered, compare delivery fees carefully.

It is also important to factor in any commission charges when you’re comparing foreign exchange offers – keep in mind that commission-free deals often have poorer exchange rates.

Whatever you do, don’t leave buying your foreign currency until you get to the airport as exchange rates will be worse at the bureau and you’ll pay a higher rate of commission.

If you end up leaving it until almost the last minute, you can still save money by pre-ordering your currency for collection at the airport, although you’ll usually need to do this at least four hours in advance.