Having paid out already for flights, accommodation and travel insurance, most people are keen to maximise their spending money on holiday, but this takes a bit of organisation and forward planning.
Using a credit card abroad is no different to using one at home but you have to remember that credit is not free money. You have to pay off the balance each month or you will find yourself paying high interest charges. However, many people feel more secure using their credit card than carrying cash around. When exchanging currencies there are always fees to be paid and when using your credit card abroad there are three areas you need to beware of: exchange-rate fees, cash-withdrawal fees and interest payments on cash withdrawals.
It rarely makes sense to withdraw cash on your credit card, at home or abroad, as unlike other purchases most cards charge interest immediately on cash borrowing. This can be made worse by a cash-withdrawal fee, which is usually a small percentage of the amount withdrawn or a few pounds. So ideally you should find another way to access cash abroad. It does make sense to use your credit card abroad if you are with a provider which does not charge an exchange-rate fee, in which case it confers more or less the same advantages as using it at home.
Debit cards carry similar fees to credit cards, usually a currency-exchange figure of a few per cent or pounds, whichever is higher, plus a cash-withdrawal fee. On the other hand, this can be offset by some of the benefits for account holders, such as entry-level travel insurance policies. There are a couple of cards available which do not apply penalties to spending abroad but unless you do a lot of travelling, the conditions may not suit you well enough to consider changing your bank account.
Cash is the cheapest way of obtaining foreign currency but is riskier to carry around. The best exchange rates can usually be found by doing some research beforehand rather than leaving it to the last minute and being forced to use poor-value airport currency exchanges. Online currency specialists offer very competitive exchange rates and will deliver to your home, although a minimum spend of 500 may be required to avoid delivery charges. You can also arrange to pick this cash up at the airport. On the high street you will often find 0% commission deals or good exchange rates but rarely both at the same time the best exchange rates generally come with the highest commission and vice versa. Look around and the best deals can usually be found with a medium level exchange rate and 0% commission.
Pre-paid cards are becoming popular for their security, both in terms of controlling spending and in minimising the damage done if the card should be stolen. They work in the same way as a credit or debit card but come pre-loaded with a balance. When using pre-paid cards abroad you will often find they offer the most competitive foreign-currency exchange rates. This can be offset by extra fees, so do your research to find the cheapest option.
Written by John Griffiths – *for entertainment purposes only*
John is a writer based in Chester, UK