The holiday season is upon us so if you are planning to get away here are a few pointers to help you make the most of your money when travelling abroad.

Firstly, think about how you will budget for your expenses. Will you use cash, prepaid currency, travel cards, or a debit or credit card?

Each has its own advantages and disadvantages.

Most convenient

Cash is the most convenient way to pay for small purchases such as tips, taxis or for places that don’t accept cards. It’s also easy to get local currency when you need it. However, carrying large amounts of cash can be risky as it can be lost or stolen.

Don’t take more cash than you need and don’t carry cash in easy to reach pockets – make sure it’s carried safely and discreetly. When at your destination, consider hotel safes or other secure places to store cash and important documents such as passports.

Before you go, compare the exchange rates offered by different providers, such as banks, exchange bureaus, and online services to ensure you get the most favourable rate.
Avoid exchanging money at airports, where rates are typically much higher.

Convenient and safe

Prepaid currency or travel cards are the modern version of travellers’ cheques and are arguably the safest way to carry money abroad, as you’ll have access to your money without having to carry lots of cash around with you. With a pre-paid card, you can load the exact amount of money you want to take away with you.

These types of cards often allow you to spend and withdraw cash without being charged interest or fees. Additionally, you may have the additional security of being able to freeze or stop your card should it be lost or stolen, although you should check this with the issuer.

Debit and credit cards can also be a convenient and safe way to pay for expenses while travelling, allowing you to withdraw cash from ATMs or to make purchases. However, while most card providers will let you spend abroad, many will charge you for the privilege in the form of foreign transaction fees and you should be aware of any additional charges that may be applied for things like cash withdrawals.

If you do plan to take a card abroad, it is worth researching specialist travel cards with reduced or no transaction fees, or credit cards which may be offering 0% interest for a period of time (do check if the 0% also applies to cash withdrawals if you are planning to use the card in this way).

When using a card to settle bills while abroad you will normally be asked if you would like to pay in the local currency or pounds sterling – you should always choose the local currency. If you choose pounds sterling the retailer can then apply what is called a ‘dynamic currency conversion’ (DCC), which is likely to have a higher exchange rate than your card issuer and so the cost to you will be more.

Making the most of your travel money – top tips

• When using your credit card for foreign transactions or cash withdrawals, make sure you know what you will be charged in fees and/or interest charges. The convenience and the security of a credit card is useful but understanding what it will cost you is important.

• Shop around for the best exchange rates before you travel. Don’t buy currency at the airport as you will generally get a poorer rate.

• Consider using a specialist travel money card which can be pre-loaded with foreign currency at potentially better rates than you would get from a bank.

• Be aware of any cash withdrawal fees that may be charged by your bank.

• When making purchases in a foreign currency, pay in the local currency rather than sterling to avoid being hit with a ‘dynamic currency conversion’ fee.

• Check if your travel insurance policy covers you for any loss or theft of cash whilst abroad.

• Research tipping practices in the country you are visiting to avoid under or over-tipping.

• Emergency funds - have a backup plan in case you lose your primary payment method, such as carrying an additional credit card or having emergency cash.

• Keep the contact information for your bank and credit card company handy in case you need to report lost or stolen cards.

Following these simple tips will help you to make the most of your travel money and avoid being stung by hidden charges.

Please note: This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

FP2024-295 - Last updated July 2024