1. Introduction
You’ve booked the flights, secured the perfect accommodation, and are already dreaming of sun-drenched beaches or bustling city streets. In the whirlwind of holiday planning, one crucial detail is often left until the last minute: your travel money. Treating it as an afterthought is a common mistake that can silently chip away at your holiday budget through poor exchange rates and hidden fees.
Getting savvy with how you spend abroad doesn’t have to be complicated. With a little forward planning, you can ensure more of your hard-earned cash goes towards creating memories, not towards unnecessary bank charges.
This comprehensive guide will walk you through everything you need to know, from the essential rules of overseas spending to choosing the perfect mix of payment methods for your trip. We'll explore the pros and cons of specialist travel cards, the role of cash in a digital world, and other clever tactics to make your money go further.
2. The three golden rules of holiday spending
Before we dive into the different ways to pay, there are three fundamental principles every UK traveller should understand. Getting these right will save you money and stress, regardless of your destination.
Golden rule #1: Never leave it to the airport
It’s the classic holiday scenario: a last-minute dash to the airport's bureau de change. While convenient, this is almost always the most expensive way to get foreign currency. Airport exchange desks have a captive audience and their rates reflect this, often including wide margins and extra commission fees. Planning ahead and arranging your currency or travel cards a week or two before you fly gives you time to compare providers and secure a much more favourable rate.
Golden rule #2: Always pay in the local currency
When using your card in a shop, restaurant, or even at an ATM abroad, you'll frequently be presented with a choice: pay in Pounds Sterling (GBP) or the local currency (e.g., Euros, Dollars, Baht). It might seem helpful to see the cost in pounds, but you should always choose the local currency.
When you choose to pay in pounds, you are allowing the retailer's bank to handle the currency conversion. This process, known as Dynamic Currency Conversion (DCC), almost invariably uses an uncompetitive exchange rate, padding their profits at your expense. By choosing the local currency, you pass the conversion back to your own card provider (like Visa or Mastercard), who offer near-perfect wholesale exchange rates. Even if your card has foreign usage fees, you will still almost always get a better deal by declining the offer to pay in pounds.
Golden rule #3: Know your everyday cards' foreign fees
Don't assume the debit and credit cards you use every day in the UK are suitable for overseas travel. Most high-street bank cards impose a cocktail of charges when used abroad:
- Non-Sterling Transaction Fee: A percentage (often around 3%) added to every purchase you make. This means spending the equivalent of £100 actually costs you £103.
- Cash Withdrawal Fee: A flat fee or a percentage charged every time you use a foreign ATM.
- Interest on Cash Withdrawals: Credit cards often charge a high rate of interest on cash withdrawals from the moment the money is dispensed, even if you pay your bill off in full.
Before you travel, check your bank's terms and conditions. A quick search on their website for "using my card abroad" will reveal the charges. Realising your everyday card is expensive is the first step towards finding a much cheaper alternative.
3. Crafting your perfect travel money mix
The smartest approach to holiday spending isn't about picking one single method, but about creating a flexible "wallet" that combines the strengths of different options. Here’s a breakdown of the main contenders and how to use them effectively.
1. The specialist travel credit card: For security and big spends
A specialist travel credit card is one of the most powerful tools for overseas spending. These cards are specifically designed to eliminate the non-sterling transaction fees that standard cards charge.
How They Work: When you spend, the card provider uses the near-perfect Mastercard or Visa exchange rate for that day, without adding their own 3% fee on top. You get an excellent rate on all your purchases.
The Advantages:
- Superb Exchange Rates: Consistently among the best rates you can get.
- Purchase Protection: Purchases over £100 and up to £30,000 are protected under Section 75 of the Consumer Credit Act. This means if you buy a faulty item or a tour operator goes bust, your card provider is jointly liable and you can claim your money back.
- Global Acceptance: Accepted almost everywhere worldwide.
- Security: If the card is lost or stolen, you can cancel it immediately and aren't liable for fraudulent transactions.
Things to Watch Out For:
- Repay in Full: The benefits are only realised if you pay your balance off in full each month via Direct Debit. Otherwise, the interest charges will quickly outweigh any exchange rate savings.
- Cash Withdrawals: Even on specialist cards, withdrawing cash can be a pitfall. Many still charge fees or, more importantly, high interest from day one. Using a credit card for cash can also be noted on your credit file, which lenders may view negatively if you're planning a major application like a mortgage soon.
- Credit Check: You will need to pass a credit check to be accepted for one of these cards, so it pays to apply in good time before your trip.
Best for: Larger purchases like hotel bills, car hire deposits, and restaurant meals where purchase protection adds peace of mind.
2. The specialist travel debit card: The flexible everyday spender
These cards are linked to a current account, often from app-based digital banks, and are also designed to scrap foreign transaction fees. They offer many of the same rate benefits as travel credit cards but function differently.
How They Work: You open a new bank account (which is often quick and easy via a smartphone app) and top it up with money from your main UK account. You then spend this pre-loaded money abroad with no extra fees.
The Advantages:
- Excellent Exchange Rates: Like the credit cards, they use the near-perfect bank-to-bank rates.
- No Debt or Interest: Because you’re spending your own money, there’s no risk of running up a bill or incurring interest charges.
- Budgeting Control: Only being able to spend what you've loaded onto the account makes it a fantastic tool for staying within your holiday budget.
- Easier to Get: Applications often involve a simpler identity check rather than a full "hard" credit check, making them more accessible.
Things to Watch Out For:
- Must Be in Credit: You need to remember to top up the account before you can spend, which requires a little bit of management.
- Lower Protection: Debit card transactions aren't covered by Section 75. However, you can still use the "chargeback" scheme for disputes, although this is a customer service promise rather than a legal guarantee.
- ATM Limits: Most cards will have daily or monthly limits on how much cash you can withdraw for free.
Best for: Day-to-day spending, coffee stops, lunches, and fee-free cash withdrawals (within limits).
3. The prepaid travel card: For locking in rates and budgeting
Prepaid cards act like a modern-day traveller's cheque. You load them with a specific currency before you leave home, locking in the exchange rate on that day.
How They Work: You choose a provider, order a card, and then use their app or website to load it with, for example, €500 or $1,000. That amount is then on the card in the foreign currency, ready to spend.
The Advantages:
- Lock in Your Rate: If you think the value of the Pound is likely to fall before your trip, you can lock in a rate in advance, giving you certainty over your budget.
- Strict Budgeting: It’s impossible to overspend, as the card will simply be declined once the funds run out. This is great for managing holiday spending.
- Security: Your main bank account isn’t linked to the card. If it’s lost or stolen, you can block it and your funds are protected.
- Multi-Currency Options: Many cards allow you to hold several different currencies at once, which is ideal for multi-destination trips.
Things to Watch Out For:
- Rate Fluctuations: Locking in a rate can be a gamble. If the Pound strengthens after you’ve loaded your card, you’ll have missed out on a better rate.
- Potential Fees: Be sure to read the small print. Some cards have fees for loading money, ATM withdrawals, or even for periods of inactivity.
- Acceptance Issues: They may not be accepted for pre-authorisation transactions where a deposit is required, such as at car hire desks or some hotels, which prefer a credit card.
Best for: Travellers who want to stick to a firm budget or who want to hedge against negative currency movements.
4. Foreign cash: The essential non-digital backup
In an age of tap-to-pay and digital wallets, it’s easy to think that cash is obsolete. However, carrying a sensible amount of local currency remains an essential part of any travel money strategy.
The Advantages:
- Universally Accepted: From market stalls and taxis to tipping hotel staff, cash is king in many situations where cards are not an option.
- Helps with Tipping: It makes it much easier to leave small tips for good service.
- Emergency Backup: If there’s a problem with a card terminal or a local power cut, having cash means you’re not left stranded.
Things to Watch Out For:
- Security Risk: It offers zero protection. If it's lost or stolen, it's gone for good. Avoid carrying large amounts at any one time.
- Poor Rates at the Wrong Places: As mentioned in Golden Rule #1, buying it at the airport is a costly mistake. Always use a price comparison tool online to find the best rates for collection or delivery before you go.
Best for: Small, immediate purchases upon arrival, tips, transport, and as a vital backup for your cards.
4. Beyond the wallet: More holiday money-saving tactics
Your strategy shouldn't end with your choice of card or cash. Here are some extra tips to stretch your budget further.
Mastering ATM withdrawals abroad
If you need to withdraw cash, do it smartly. Besides avoiding your standard UK debit card, follow these steps:
- Use Major Bank ATMs: ATMs belonging to large, reputable local banks tend to have lower (or no) local operator fees compared to independent machines found in convenience stores or tourist traps.
- Withdraw More, Less Often: Since your card may have a fee per withdrawal (or a limit on free withdrawals), it's more cost-effective to take out a larger amount in one go rather than making multiple small withdrawals.
- Check for Banking Partnerships: Some UK banks have partnerships with foreign banks that allow their customers to use their ATMs for free. It's worth checking this before you travel.
Staying connected without the cost
Exorbitant mobile data roaming charges can be an unwelcome surprise on your bill when you get home.
- Check Your UK Plan: Since Brexit, many UK network providers have reintroduced roaming fees in Europe. Check your provider's policy for your destination before you fly.
- Consider a Travel eSIM: An eSIM is a digital SIM that you can download to your phone. You can buy a data plan for a specific country or region, often at a fraction of the cost of roaming with your UK provider. It’s a flexible and affordable way to stay online.
- Use Wi-Fi: Make the most of free Wi-Fi in your hotel and in cafes, but be cautious about using public networks for sensitive activities like online banking.
Keeping your money safe
- Don't Carry Everything at Once: Leave a backup card and the bulk of your cash in a locked safe in your accommodation. Only carry what you need for the day.
- Split Funds: If travelling in a group or with a partner, don't let one person carry all the money or all the cards.
- Know Who to Call: Have the emergency contact numbers for your card providers saved somewhere separate from your wallet (e.g., in your phone and emailed to yourself) so you can cancel them quickly if they go missing.
5. The journey home: Managing your leftovers
What should you do with that handful of notes and coins at the end of your trip?
- Leftover Currency: Keep the coins. Bureaux de change won't buy them back, but they can be handy for your next trip to that country. For notes, you can sell them back. Some providers offer a "buy-back guarantee" if you buy from them initially, but it's still worth comparing rates to ensure you're getting a good deal.
- Leftover Card Balance: On a prepaid or debit card, you can usually leave the balance for your next trip. Alternatively, you can often withdraw the remaining balance in Sterling at a UK branch (check with the provider), or simply spend the remaining balance in the UK, where it will be converted back to pounds.
6. Your travel money checklist: Key takeaways
Planning your travel money is just as important as packing your suitcase. By following a few simple steps, you can save a significant amount.
- Plan Ahead: Arrange your travel money at least a week before you go. Avoid the airport bureaux de change at all costs.
- Embrace a Mixed Approach: The best strategy is a combination: a specialist travel credit or debit card for the bulk of your spending, supplemented by a sensible amount of local cash for small purchases and emergencies.
- Always Pay Local: When given the choice on a card machine, always choose to pay in the local currency to get the best exchange rate.
- Stay Secure: Be vigilant in tourist areas, split your money and cards, and keep valuables in a safe.
- Think Beyond Currency: Save money on other travel essentials like mobile data by investigating options like eSIMs before you depart.
By taking control of your holiday finances, you can relax and focus on what truly matters: enjoying every moment of your well-deserved break.
