Spending Abroad

from Potton May 2022

The Platinum Jubilee - It’s a Mug’s Game

With travel restrictions easing, more of us will be taking a city break or soaking up some sun overseas this summer. That means using foreign currency, but what’s the best way to spend abroad?

CASH

While a range of options could be best for your case, the golden rule to remember is never to get currency at the airport if you can help it. Those exchanges usually offer highly uncompetitive rates, knowing that at this point you have little opportunity to shop around. The earlier you can get your money, the more options you have. As well as specialist currency exchanges, many supermarkets and large retailers offer foreign money, though you may need to order money for some countries a few days in advance. You can also use online exchanges that will post the money to you by a secure delivery service. To be sure you get the best deal, check out online comparison sites that show you the available rates and fees.

BANK CARD

Another option is to use your existing bank cards, either to withdraw cash overseas or to make purchases. Using a combination of cards and currency exchanges may be the best blend of cost and convenience. However, you’ll need to check with your bank to see what fees apply. This can be a complex issue as it involves several different fees. Some cards carry a fee to use a cash machine abroad, usually a few percent of the withdrawal amount. Some cards carry a fixed fee for every purchase you make. With both withdrawals and purchases, you may be charged an ‘exchange load’, which is effectively a fee in the form of a slightly worse exchange rate than the current market rate.

CREDIT CARD

Be particularly wary of using your ordinary credit card to withdraw cash overseas. You may have to pay interest for the period between making the withdrawal and paying it off on your account, overriding your usual interest-fee period for purchases. Making cash withdrawals on a credit card may also be seen as a bad sign on your credit record, so it’s definitely worth avoiding if you are planning a loan or mortgage application in the coming months. If you expect to be spending a lot overseas, you could consider getting a specialist credit card. These usually carry no fees or exchange load, so you get the cheapest spending. The downside is that they often carry high interest if you don’t pay your bill in full, so they are better as a source of convenience rather than borrowing. You will also have to go through the usual credit checks when applying, so not everyone will be approved for every card. You could also get a prepaid travel card. These let you ‘load’ the card with a balance in pounds and then lock in a fixed exchange rate. Once you’re overseas, you can use them like an ordinary debit card. Check fees carefully: you may have to pay a transaction fee each time you spend or withdraw cash.

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