The best ways to spend abroad

Whether you’re on a family getaway or gap year, using money abroad can cost more than you think if you’re not careful. High exchange rates and unexpected fees can mount up quickly and eat into your budget every time you spend. Explore the options for helping your holiday money go further.

Alex Hasty

Insurance and finance expert

minute read

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Posted 05 JANUARY 2021

What are your options for spending abroad?

You’ve basically got the options of cash, debit cards, credit cards and prepaid cards, or a mix of a few of these. Here’s a detailed rundown of the pros and cons of each to help you decide which is right for you.

Cash

The coronavirus crisis has made many of us more wary about handling cash, but you may still want to carry a small amount with you – even now, not everywhere accepts contactless payments.

Always buy foreign currency in advance – don’t wait until you get to the airport or your destination as the exchange rates are likely to be considerably higher. The most competitive deals are usually found online. Avoid buying foreign currency with a credit card as you might be charged a cash withdrawal fee and interest.

Pros of spending with cash abroad

You won’t have to pay transaction fees.
Good for sticking to a budget as you can keep an eye on how much you’re spending.

Cons

Carrying around large amounts of cash can be unsafe.
The exchange rate is locked in the day you change your money so you may not get the best deal.

Did you know?

There are limits to how much cash you can take out of the UK without declaring it at customs. For more information on this, you can visit GOV.UK.

Debit card

Using your debit card is a convenient way of paying for things and taking out cash abroad. But it can also be one of the most expensive as you may be hit with a fee every time you make a purchase or withdrawal. This can lead to a nasty surprise when you get your bank statement.

Some app-only banks including Monzo and Starling offer fee-free debit cards that can let you spend wherever you are in the world.

Pros of using a debit card abroad

A debit card can be a quick and easy way to pay for goods and services and it can help you avoid taking cash abroad.
It’s easy to cancel your card if it gets lost or stolen.

Cons

With most debit cards, you’ll be charged a fee every time you withdraw cash from an ATM. There could be a transaction fee of around 2.75% and some cards will also add a cash fee of around £1.50 on top.
For purchases, you’ll usually pay a foreign exchange fee for converting to the local currency.

Credit card

Credit cards can let you spend while you’re on holiday and pay off your bill after you get home. Using a standard credit card is likely to involve fees, but you can get specialist travel credit cards that have no extra charges for using your card abroad. Also, a travel credit card can give you cashback on spending and commission-free purchases while abroad.

Pros of using a credit card abroad

Visa and Mastercard are likely to be recognised all over the world.
Under Section 75 of the Consumer Credit Act, you could get some protection for any purchase costing between £100 and £30,000 if the item is faulty or the company you bought it from goes bust.

Cons

If you use your credit card for withdrawing money abroad, you’ll often be charged a fee of around 2.99%, plus interest straight away, even if you pay off your card in full the same month.
It’s easy to overspend on a credit card – especially when you’re having fun in the sun.

Prepaid card

Prepaid cards can be loaded up with cash before you go abroad, then spent in shops and restaurants in the same way as a debit card. They can also be used to withdraw money from ATMs.

Although you may still be charged fees, prepaid cards are often cheaper to use than a standard debit or credit card. Also, they won’t let you spend more than the amount of money you’ve put on the card, so they can be useful if you’re on a budget.

Pros of using a prepaid card abroad

Prepaid cards aren’t linked to your bank account so there’s less risk if they’re lost or stolen.
You can usually hold several different currencies on the same card, including euros and dollars.

Cons

Some prepaid cards have additional charges like a monthly admin fee or an extra charge if you don’t use the card within a certain period.
Some car hire firms and hotels require pre-authorisation with a credit card and won’t accept prepaid cards.

Three top tips for spending abroad

Get the most from your money while you’re overseas with our top tips:

Think about taking a mix of payment types so you’ve got a back-up in case a card or cash is stolen or lost.
When you pay by card abroad, you may be offered the choice of converting the amount to sterling. Always pay in the local currency – converting it typically comes with higher fees.
Make a note of your card company’s 24-hour helpline so you can contact them straight away if your card is lost or stolen.