Foreign spending can be very expensive if you use the wrong type of credit or change currency using a poor exchange rate. Before you leave the country, ensure you’ll be able to spend and withdraw cash abroad in a financially savvy way without having to worry about accrued charges. Here are five tips to help you find the best options available.
Never change currency at departure points
Bureaux de change are located at all major departure points and allow you to change currency at the last minute. These should be avoided – they have a monopoly on currency exchange at airports and seaports and know that if you need to use their services, you’re stuck for any other options. This normally results in very poor exchange rates and high commission charges. If you need to change currency at the airport, phone at least four hours ahead and see if a pre-order service – with a slightly better exchange rate – is offered.
Avoid dynamic currency exchange abroad
Many retailers offer dynamic currency exchange, allowing you to pay for goods in sterling regardless of the local currency. This may seem attractive as it allows you to carry pounds and avoid paying poor exchange rates at the airport. However, you should always pay in local currency – the exchange rate is the whim of the retailer, calculated on the spot, meaning you’re likely to receive an extremely poor deal and end up paying more. Always pay in local currency.
Do not use debit cards to fund foreign spending
Common UK debit cards should not be used to withdraw money or spend abroad as banks often tack on significant fees. The worst offenders can charge up to £2 every time they’re involved in foreign currency transactions. Leave debit cards at home when you go abroad so you’re never tempted to spend on them. The only exception is cards that are purposefully designed for foreign sending – these may waive any fees and allow you to withdraw cash without charge.
Use only the right credit cards
Never use common credit cards to spend when abroad. Many are subject to a standard 3% charge on top of the bank exchange rates, which can result in a hefty fee on larger transactions or longer trips. Specialist credit cards – designed for efficient foreign spending – do not charge this fee, so you get your currency at the same exchange rate as the bank. This is one of the most efficient ways to spend abroad, but you must set up direct debits to make at least minimum monthly repayments or the interest you’ll pay will be hefty.
Pre-paid cards are an alternative option
A prepaid credit card offers a convenient way to spend abroad and an attractive degree of security: you can only ever be liable for the money pre-loaded on the card. Whilst not as cheap as the specialist credit cards discussed above, they are widely accepted and can be replaced by the provider – with all your funds intact – for an administration fee of between £5 and £20.