Travel Money: The Best Way to Spend Abroad

Spending money abroad is one of those areas where the difference between the best and worst option is large, entirely avoidable, and mostly down to a handful of decisions made before you leave.

The single most important rule

When a foreign card machine or cash machine asks whether you would like to pay in pounds instead of the local currency, always choose the local currency.

This is called dynamic currency conversion. It sounds helpful — you see the amount in pounds, so you know what you are spending. In reality the merchant’s payment processor sets the exchange rate, and it is almost always considerably worse than the rate your own card would give.

Choosing the local currency lets your card’s network do the conversion, which is normally close to the interbank rate. This one habit saves more than most other tactics combined, and it costs nothing.

Get the right card before you go

Standard UK debit and credit cards frequently charge a foreign transaction fee of around 3%, plus a flat fee for cash withdrawals. On a two-week holiday that adds up quietly.

Better options:

• Specialist travel credit cards that charge no foreign transaction fee and use a near-interbank rate. Excellent for spending, provided you clear the balance in full each month — interest rates on these cards are often high.
• App-based accounts and travel debit cards that offer fee-free spending, usually with a monthly allowance for fee-free cash withdrawals and sometimes weaker rates at weekends.
• Prepaid travel cards, which let you lock in a rate in advance. Useful for budgeting and if you want certainty, but check fees for loading, withdrawals and inactivity.

Whichever you choose, apply well before travelling — cards take time to arrive, and credit applications involve a credit check.

Cash: how much and where from

Take some cash for small purchases, tips, transport and places that do not accept cards, but do not carry large amounts.

Where to get it, best to worst:

1. Order online in advance from a specialist and collect or have it delivered. Consistently among the best rates.
2. A local bureau in town, comparing a few first.
3. A fee-free card withdrawal abroad, which often gives a good rate if your card does not charge.
4. Your high street bank, usually mediocre.
5. The airport, which is reliably the worst. If you must, at least pre-order online for airport collection, which is far better than walking up.

Never change money at your hotel or at a tourist-area desk advertising zero commission — the margin is in the rate, not the commission.

Credit or debit abroad?

Use a credit card for larger purchases where possible. Section 75 protection applies to purchases over £100, including many made abroad, which matters if a hotel or tour operator fails.

Use a debit card or a dedicated travel card for cash withdrawals. Cash advances on a credit card usually attract interest from day one plus a fee, even if you repay in full.

Practical precautions

• Tell your bank you are travelling, or note the trip in the app, so transactions are not blocked as suspicious.
• Carry two cards from different providers, stored separately. If one is lost, blocked or eaten by a machine, you are not stranded.
• Know your PIN for cards you rarely use with one.
• Save your bank’s international number offline, in case you need to report a loss.
• Check daily withdrawal limits before you rely on them.

At the cash machine abroad

• Use machines attached to banks rather than standalone ones in shops and tourist areas, which often charge their own fee and offer poor conversion.
• Decline the conversion to pounds, as above.
• Take out larger amounts less often if your card charges a flat withdrawal fee, but only what you are comfortable carrying.
• Read the fee screen. Some machines charge an operator fee separate from anything your bank charges.

Coming home

Spend or change leftover notes before you return — buy-back rates at home are poor. Coins generally cannot be exchanged at all, so spend those first. Charity collection points at airports take leftover foreign coins if you would rather not carry them.

Fees, rates and card terms change frequently. Check the current terms with your provider before relying on any specific card.