The best ways to spend money abroad

Inflated exchange rates, transaction fees, misplacing cash… Spending in another currency is fraught with pitfalls.

But with a bit of pre-planning, you can make the money you take go further. It’s especially important if you’re going overseas for an extended stay – like travelling before uni. Over a few months those 3% card charges really add up to money you’ll miss.

In this guide, we’ll take you through your options for spending money abroad, and the pros and cons of each.

Teenagers spending money abroad or on holiday

Buying currency

The traditional route to overseas spending has always been the Bureau de Change, where you exchange pounds for hard foreign cash.

Pros and cons of buying cash

Pros Cons
Easy to keep track of spending Easy to lose
Accepted everywhere Only good for one country
No transaction charges Can get too much/too little

In many ways, cash is the easiest option, and a fantastic tool for helping you stick to a budget. The costs are clear, up-front, and you can use it anywhere.

But there may be better options if you’re travelling to multiple destinations. It’s easy to end up with a lot left over if you have to get a different currency for each country.

Plus, your travel insurance will only cover you for so much cash. If you lose it, you could end up with very little to fall back on.

Top tips for buying foreign currency

Calculate the total cost

There are three costs you need to be aware of when buying currency:

  • Commission

Often a flat fee or percentage of the amount you’re exchanging. Many companies offer 0% commission. However, this is often compensated by an artificially high exchange rate.

  • Exchange rate

Currency isn’t always sold at the same rate. Adding a percent or two on top of the ‘real’ exchange rate is how currency exchanges make money.

  • Delivery

If you buy online, there is often a delivery charge. Usually around £5. Depending how much you’re exchanging, it could eclipse any savings you’ve made elsewhere.

Make sure you take the total cost into account, rather than being swayed by a seemingly good exchange rate.

Shop around

You’ll find a Bureau de Change on nearly every high street. The Post Office can also usually exchange currency. Do take the time to compare rates, though.

You can usually find a better deal online – and it’s easier to compare, using an online comparison tool. But you may have to pay for delivery, and there is a chance it’ll get lost in the post.

Plan ahead

The closer your departure date gets, the more limited your options are. You can’t afford to wait for an online exchange to send you cash if you’re going in two days.

Whatever you do, don’t buy at the airport. Airport currency comes at artificially high exchange rates. It’s the price you pay for leaving it until the last minute.

Using your debit or credit card

It used to be considered a bad idea to use plastic overseas. But with the cultural shift towards debit and credit cards, it can be better than using cash; depending on your terms.

Pros and cons to using your debit or credit card abroad

Pros</span Cons</span
Can be cheaper than buying cash Can be expensive
Fraud and loss protection Can attract interest
Can be used across borders Can be blocked by your provider

The most important thing is to be aware of the terms of your credit or debit card. Some may penalise you for using them abroad, others encourage it.

In particular, be aware of transaction charges. A percentage of around 3% is common, but some have a flat fee - usually about £1.50 for every transaction. Often on top of a percentage charge.

On the plus side, you can generally use your credit card wherever you are, rather than being confined to the cash you have to hand. And if it’s lost or stolen, your card provider can block it and issue a replacement. You may also be protected in case of fraud.

Top tips for using a debit or credit card abroad

Shop around for good terms

Credit cards generally give you better rates than a debit card, but not necessarily. If you’re going to be travelling a lot, it’s worth taking out a new card specifically for the foreign spending terms. There are plenty of cards on the market that have 0% fees for foreign transactions.

Always pay in local currency

Card machines and ATMs will often ask if you want to pay in GBP or the local currency. Always pay in the local currency. The currency conversion is made by your card issuer, on the terms you’ve signed up to. If you pay in GBP, the ATM network does the conversion, often with a hefty surcharge.

Never take cash out on a credit card

If you pay your bill in full every month, you’ll never pay interest on your credit card. Unless you take out cash. Cash interest applies from the day you take it out. If you use an ATM the day your bill is issued, you’ll have 60 days worth of cash interest by the time you pay your balance.

Section 75 and chargeback

All credit cards and some debit come with fraud protection built in. Under Section 75 of the Consumer Credit Act 1974, all credit card issuers are legally obliged to provide a refund if you haven’t received goods or services you’ve paid for. Visa, Mastercard and Amex debit cards offer similar protection via their own chargeback scheme.

Currency cards

Currency cards work just like a normal debit card, but aren’t attached to your bank account. Instead, you transfer in sterling to be converted into other currencies.

Using a currency card, you can easily limit your spending – like with cash – but top up the balance if you need to; without throwing yourself at the mercy of overseas currency exchanges.

Pros and cons to currency cards

Pros Cons
Top up whenever you need Can lose track of spending
Same protections as a debit card Can be charges for topping up
Hold multiple currencies Possible application charges

Currency cards can be particularly good if you’re travelling to multiple countries, as many allow you to hold multiple currencies on one card. Some handle currency conversions in real-time, so you can leave your balance in sterling, and just convert as you go.

Top tips for using currency cards

Lock in a good rate

Although converting in real-time is convenient, you might get unlucky. Sterling might tumble while you’re away. Pay attention to rate fluctuations in the run-up to your trip and you might be able to get more euros for your pounds.

Pay attention to terms

As with ‘normal’ debit cards, it pays to shop around. Some cards offer ‘near-perfect’ exchange rates – as close as possible to the interbank wholesale rate. Others use the Visa or Mastercard rate and add a percentage on top. Some charge fees for small balances or lack of use.

Consider a peer-to-peer card

Peer-to-peer (P2P) cards bypass the traditional banking network, so can usually offer the best exchange rates with very low fees. Transferwise was one of the first, which is built into your Monzo account if you’ve got one. But it’s a fast-moving market, so there are plenty of other options now.

What’s the best way to spend abroad?

If you’re just going on holiday for a week to a single destination, buying currency in advance – or using some kind of currency card – is probably enough. Just keep your credit card on you as a backup.

On the other hand, if you’re travelling for a while, potentially to multiple destinations, a combination of everything is probably your best bet. Even if you’ve got a great overseas credit card, it’s still good to have some cash in case you lose it. And you might want to keep a tighter eye on your spending by using a pre-paid card.

Whatever you do, make an informed decision. Otherwise you could end up wasting tremendous amounts on fees alone.