Money for Life work in partnership with the Money Advice Service, an independent organisation set up by government. Money AdviceService provides free, unbiased money guidance across the UK to help people make the most of their money. If you have a question or need help, you can chat to them here.
By Emma has been writing about personal finance for a range of national newspapers, specialist magazines and websites for the past 15 years. She prides herself on explaining complex subject matter in a way that's easy to understand.
Travelling to foreign countries can be expensive. As soon as you have you stepped off the plane you can find yourself paying extra fees to use your debit card abroad, or extortionate commissions on foreign currency at airport kiosks.
Add in the temptation to book pricey once-in-a-lifetime excursions or nightly booze cruises and it’s easy to imagine losing control of your spending while you’re in the sun.
Fortunately, there are several things you can do to avoid rip-off exchange fees and charges while abroad – and preparation is key.
Debit card fees
Before you set off, check if your debit card charges you extra to use it abroad. It might sound dull but look through your account’s terms and conditions and search for terms such as “foreign exchange fee” or “non-sterling transaction fee” – some cards charge up to 3% of the transaction amount just for using your card in another country.
On top of this many cards also charge “purchase” fees when you pay by card, or ATM fees when you withdraw cash abroad. These tend to be from 50p to £1.50p each time.
These fees might not sound much but they can quickly add up. For example, if your card has a foreign exchange fee of 2.75% and purchase fee of £1, a £10 card transaction will cost a total of £11.28. Assuming you make two £10 card transactions every day during a fortnight’s holiday, you’ll pay nearly £36 in card fees – enough for a decent night out in some destinations.
Fortunately, not all debit cards charge these fees. App-only banks Monzo, Starling and Revolut are fee-free to use abroad and they have the bonus of categorising your spending to help you stick to a budget. You can also “freeze” these cards on your phone – handy if your card is lost or stolen.
Watch out for dynamic currency conversion
Whichever card you use abroad, you need to be aware of a sneaky trick called “dynamic currency conversion”. This happens when you pay by card and the retailer asks whether you want to pay in pounds or the local currency (e.g. Euros in Europe).
While it might sound a good idea to pay in pounds, you should say no every time as it won’t be the cheapest option. Paying in pounds allows the retailer to carry out a currency conversion calculation at a rate it chooses. If you pay in the local currency, your bank will do the calculation at a much better rate.
Watch out at the ATM as you’ll be asked the same question. Make sure you say “no” to the currency conversion offered – you’ll still be able to complete the transaction but at your bank’s more favourable rate, not the rate dreamt up by the local ATM.
Where to get your cash
Most people like to arrive in a foreign country with some of the local currency, rather than having to hunt for an ATM on arrival.
But where you buy your cash can make a big difference to how much you get. Each foreign exchange bureau will offer different rates and fee structures. Don’t be fooled by money changers claiming to be “commission-free” – they normally just offer worse rates to make their profit.
The question you need to ask is “How many euros/dollars/ etc. will I get for X number of pounds?”
In general, the best deals can be found by shopping around online and collecting your foreign currency in person. The worst rates are always found at the airport – so never wait until you’re airside to buy your foreign currency.
Budgeting
I don’t want to sound like a parent, but it’s a great idea to stick to a budget while on holiday. Work out how much spending money you can afford to take and divide it by the number of days you’re away – that’s your daily budget and you should make every effort to stick to it.
Alternatively, you could work out a budget for different types of spending on holiday such as excursions, food, drink and taxis. Remember, the more you can stick to your budget, the more holidays you can have…happy days!
Emma has been writing about personal finance for a range of national newspapers, specialist magazines and websites for the past 15 years. She prides herself on explaining complex subject matter in a way that’s easy to understand.
Money for Life work in partnership with the Money Advice Service, an independent organisation set up by government. Money AdviceService provides free, unbiased money guidance across the UK to help people make the most of their money. If you have a question or need help, you can chat to them here.
