It is around this time of year that we start dreaming about our summer holiday and begin pondering how much money we are likely to need and how best to take it with us. In this article we have outlined the best and cheapest way to withdraw cash abroad, as well as the best and cheapest way to pay by card without being charged.
A popular method of taking money on holiday is just carrying cash in the currency of your destination. Taking cash abroad also allows you to stick to a budget and is an easier way to track your spending, however, there are a couple of drawbacks with this option.
- Security - Carrying a large amount of money anywhere creates a security problem, often when abroad we inadvertently advertise the fact we are tourists - checking maps, asking for directions etc. - thus leaving us vulnerable to theft.
- Exchange rate - All foreign currency services advertise two exchange rates - buying rate and selling rate, this means that you often buy foreign currency at a higher rate than the one offered if you have money left over at the end of your holiday. Additionally, when purchasing cash you are locking in at one exchange rate which doesn't guarantee you getting the best deal or the most for your money.
It is not recommended to take cash abroad as your only means of payment but obviously, you'll inevitably need to take some cash on your holiday to pay for things like taxis and tips. In this instance make sure you take no more than necessary and be mindful of security at all times.
One of the safest ways to take money on holiday is a credit card as the security issue is minimal and you don't have to decide in advance how much money you will need. If you do lose your credit card, or have it stolen, then just contact the card provider and they will issue a replacement. Additionally, some card providers allow you to block the card by using a smartphone app. There are a couple things you need to be aware of before deciding on this method to take money on holiday.
- Conditions - check the conditions for your particular credit card as there will usually be charges for cash withdrawals and even for just using your card abroad. One thing to note is that most cards charge interest on cash withdrawals even if you repay the balance.
- Dynamic currency conversion - this means that suppliers may charge you in sterling rather than the local currency, the rate used for these sterling transactions is invariably not very competitive so always opt to pay in the local currency.
If you do not currently have a credit card then there a number of credit cards offer 0% interest, for a period of time, as well as reduced or no transaction fees, but again make sure you check all the conditions.
Using a credit card will also require a degree of discipline to make sure you pay off the balance when returning from holiday, and not end up still paying for this year's holiday next year.
Some of the best credit cards with no overseas transaction fees are outlined in the comparison table below:
|Provider||Fees abroad||Interest rate||Cash withdrawal fee||Cash withdrawal Interest rate|
Rewards credit card
|Santander Zero credit card||0%||18.90%||0%||18.90%|
|Halifax clarity credit card||0%||19.90%||0%||19.95% or 27.95%|
|118 118 money credit card||0%||34.00%||0%||34.00%|
Based on the above table the best credit card for overseas spending on cards is the Santander credit card as it has the lowest interest rate; but for overall spending including cash withdrawal the 118 118 money credit card may work out best because you won’t be charged interest on overseas purchases or cash withdrawals so long as you pay off your balance in full that month. To find out more about the best credit cards to use abroad, check out our article 'Compare the best travel credit cards'.
Although not a credit card the Curve card is a great option to consider when travelling abroad. The card enables you to link all of your debit and credit cards via a secure app, meaning you only need to take one card away with you (easily switching between cards using the app) By using the Curve card you won't pay any hidden fees, you'll get instant notifications so you can keep track of your money and you'll benefit from paying at the 'real exchange rate' each time you make a purchase.
- Only have to carry one card but can spend on all of your personal cards
- Instant notifications on spending
- Categorised spending
- Notifications in local currency as well as your currency
- 1% cash back on spending for 90 days
For more information about the Curve card, read our 'Curve review'
The best pre-paid travel card
Pre-paid cards are a fairly new way to take money on holiday, you simply put as much cash as you want on the card before the start of your holiday (or even top up while you are away). Pre-paid travel cards can be used in a similar way to a credit or debit card and you can even use them to withdraw money from an ATM (using a pin that is sent out once you set up the card). Most cards will allow you to check the card balance and add or withdraw funds, either by phone or over the internet. The charges on these cards vary by provider, so you will need to check the terms and conditions of your card provider. At present, prepaid cards are only available in the main world currencies but as their usage increases more currencies will inevitability become available.
Be aware - if you use a pre-paid card when checking into a hotel or hiring a car, the provider may 'ring fence' an amount on your card to protect themselves against future charges for services used or damage incurred. Typically a hotel will 'ring fence' around £250, whilst a hire car firm could 'ring fence' as much as £1,000. This amount will not be physically taken from your card but it will mean you'll be unable to spend that amount until you have checked out of the hotel or returned the car. It may be wise, therefore, to use your normal credit card as security in these instances but make sure you settle the bill in the local currency as the provider's currency exchange rate will normally provide poor value.
The current best travel pre-paid cards are:
Highly recommended - This is actually the card I use when I take money abroad. Easy to use, good value and some amazing extra features.
- Can have balances in different currencies on the same card
- Easy to top up when travelling using the Revolut app
- Very competitive exchange rates
- Free cash withdrawals up to £200 per rolling month, withdrawals over £200 will be charged at 2% (be aware that some ATMs will also charge a separate fee)
- If a balance is left on your card when returning from travelling this can be spent at home by using the Revolut card as a debit card
- Split bills with family or friends at the touch of a button with no need for them to download the app and you'll receive funds instantly
- Instant payment notifications with all transactions automatically categorised
- Ability to freeze or unfreeze your card through the app if lost, mislaid or stolen
- Free cash withdrawals (be aware that some ATMs will charge a separate fee)
- No charges on spending
- Top up is free via direct/debit or online
- Most major currencies accepted
- Extremely competitive exchange rate, determined daily by Caxton.
TUI multi-currency card
- 13 currencies can be held at any one time
- App for checking balances and topping up card
- Fixed exchange rate at time of buying currency
- £6,000 maximum balance
- £500 daily cash withdrawal limit
The best app-only bank for travelling abroad
App-only banks are a great and relatively cost-free way of taking your money abroad this year. These banks are mobile-only and everything is managed in app. They work in a similar way to Revolut but are also actually a bank so you spend using your debit card; you think this sounds too good to be true and there must be a catch, in fact the only catch is there are no fees for spending abroad. (It is worth remembering that although there are no cash withdrawal fees, some ATMs are subject to charge.)
- Use wherever Mastercard is accepted
- Withdraw £200 for free (a 3% charge applies afterwards)
- No transactional fees
- Spend with Mastercard's exchange rate and no mark up fees
- Current exchange rate notifications upon arrival
- No need to notify the bank that you are travelling abroad (meaning your card will not be blocked)
- Ability to free and unfreeze your card if lost or stolen
- For more information read our 'Monzo review'
- No cash withdrawal fees
- Spend with Mastercard's exchange rate and no mark up fees
- Earn interest on your balances (0.05% on balances up to £85,000)
- 24/7 customer support
- Lock and unlock your card in app if lost or stolen
- For more information read our 'Starling Bank Review'
For years Travellers' cheques were the most popular way to take money on holiday but thanks to the influx of cost-effective cards their usage has dramatically declined. Travellers' cheque are still a viable option but there are a few things to consider first:
- Fees - there will be a fee charged for buying the cheques and another charged for changing them into the local currency.
- Ease of usage - with the reduction in their usage, not all stores and restaurants will accept travellers' cheques, leaving you to change the cheques for cash at your hotel or local bank when you get home.
Best way to take money to the USA
The USA, and in particular Florida, is a popular destination with British holidaymakers and taking money to the USA has never been easier. Personally, I use the Revolut card as it has a great exchange rate and comes with a handy app that enables you to keep an eye on your money. You can also top up your balance via the app or online if you overspend at the theme parks. Although you can use a pre-paid card to purchase items, just like a debit card, I also make sure I have a credit card with me for larger purchases or in the unlikely event that my pre-paid card is not accepted.
In my opinion the best way to take money on holiday is a mixture of cash and a pre-paid card or app-only bank debit card. It is easy to open a new app only bank account and if you do so before you go on holiday, you needn't do anything else. Alternatively, if you are not ready to make the switch and have them as your main bank account, it is simple enough to apply for a card and you have the same protection and security as a bank account, without the hidden costly fees.
Try and carry the minimum amount of cash possible, just enough for low ticket items, such as taxis or tips, leaving the card for bigger purchases or withdrawing top-up cash when needed. Although withdrawing cash at an ATM may incur a small charge (usually levied by the ATM operator and not the prepaid card provider), this is a small price to pay for the security provided.
If you are using a card to settle bills when abroad you will often be asked whether you want to pay in local currency or in pounds sterling. You should always choose the local currency otherwise the retailer can apply what is known as Dynamic Currency Conversion, which is likely to have a higher exchange rate than your card issuer and so the cost to you will be greater with the retailer pocketing the difference.
Other useful articles
Looking for a financial adviser near you?
Do you need financial advice? An independent financial adviser can show you how to make the most
of your money. Find your nearest qualified and regulated adviser using this VouchedFor search tool.
Alternatively, Hargreaves Lansdown, one of the UK’s largest firms providing restricted financial advice, is offering a £200 John Lewis voucher* to new clients.