What is the best way to spend money abroad?
If you’re going on holiday this summer, you might have made a packing list and checked your passport isn’t close to expiring but have you thought about the best way to spend money abroad?
Unless you want to be penalised every time you buy something on your foreign trip, from a coffee to a taxi fare, it’s important to plan whether you’re going to use a credit card, debit card, cash or a prepaid card - and consider how much you might be charged to do so.
Some credit and debit cards will charge you a foreign transaction fee every time you use them. This will quickly make your holiday more expensive, especially if you’re not staying in an all-inclusive. If you’re self-catering for seven days and pay for your accommodation costs via a card that charges you for using it, you could end up paying anything from 50p to £10 in fees each time you use it. But the good news is that these are avoidable.
In this blog post, we’ll explore the ways to spend money abroad and list some of the advantages and disadvantages of each. We’ll also list the potential costs that can be incurred when spending money abroad so you can choose the best way to avoid them. This should help you work out what you need to do to spend money abroad without fees.
Things to consider before working out how to spend money abroad
Paying for things abroad isn’t as simple as putting your contactless card on the reader and paying the cost written on the price tag. There are a few factors that influence how much you end up paying, meaning that it’s possible for two friends to spend different amounts on the same product if they pay with different methods.
The factors that influence how much you will spend include:
Card exchange rates: This is the rate at which your home currency is converted to the foreign currency. There are currency conversion calculators on both the Visa website and Mastercard website to help you decide what’s best.
Cash exchange rates: Banks and bureaux de changes offer different rates for converting your sterling into another currency. For example, some of the most rip-off exchange rates are found at airports. If you want to take cash, it’s a good idea to research different exchange rates. Some cards will also allow you to use ATMs for free abroad to take out cash as and when you need it, but you’ll need to check the exchange rate offered to see how it compares to one offered by a bank before you go.
Transaction fees: Many banks and financial institutions charge fees for using your cards abroad. If you are affected by this, you might want to take a different FX fee-free card (like HyperJar ) for your trip.
How to spend money abroad without fees
When you’re working out whether to take cash, a credit card, a debit card, a prepaid card or a mix of a few options, you need to know what fees are involved with each.
This table gives you the information at a glance, then we’ll look at all the options in more detail.
1. Prepaid Travel Cards
When you use your regular bank card to make payments abroad, you usually pay significant international FX fees, whether withdrawing money from an ATM or buying a meal at a restaurant.
With a prepaid travel card like the HyperJar card, you can pay for what you like without paying international fees. You only pay for the price listed on whatever you’re buying – whether it’s a meal out, a boat ride, or a souvenir for a friend – without being surprised by bank fees that hike up the price of every purchase.
Using a prepaid travel card has many other benefits besides this, including:
- Can be used anywhere – well, anywhere that accepts Visa or Mastercard cards.
- Help you stick to your budget – since it’s easy to forget to factor in international fees when treating yourself on holiday. With no fees, there are no worries. You can also add a set amount to the card to curb your spending. Our card has handy payment control features for travellers that can also help you to avoid overspending and budget whether you are travelling lavishly on a high budget or travelling affordably on a low budget.
- Safer than carrying cash – cash is easily stolen and rarely tracked down.
- You can freeze your prepaid travel card like a regular debit/credit card. This means you can protect your money even if your card is lost or stolen.
- You don’t need to pass any credit checks to get one of these cards.
- You can load up your card in advance, you have the option to do this when the exchange rate is competitive, meaning you won’t lose out if the exchange rate gets worse while you are on holiday (unless you need to top up again, of course).
2. Cash
Many people say carrying cash is the best way to spend money abroad because you aren’t subject to banks’ pesky international fees, and it’s definitely an option to consider:
- No fees for spending abroad
- It can help you stick to your holiday budget – if you only take a certain amount of cash (a.k.a. the amount you plan to spend), you’re more careful about what you spend it on and always know how much you have left
- Can be used anywhere – aside from cashless, card-only establishments. However, this is only a better value option if you exchange your money before you come to the country or after you’ve landed at a currency exchange, but not at the airport. Airport currency exchanges charge extortionate exchange rates because they know they’ve got travellers hostage.
Make sure not to get this cash out of ATMs when you’re abroad as you might be charged international fees from your bank for withdrawing money in a foreign country.
Lastly, be wary of theft since cash is easily stolen and almost impossible to track and recover. And don’t keep all your cash in the same place, so that if your wallet or bag is stolen you have a back-up.
3. Debit Cards
Many people use their bank debit cards in foreign countries, though it’s probably not the best way to spend abroad since many banks charge international transaction and withdrawal fees.
However, sometimes the cost of convenience can be worth it – and a debit card is what most people are used to paying with at home. If convenience is more important to you than paying a little extra on your purchases, then using a debit card might be the best way to spend abroad for you.
For each card transaction you make abroad, you can expect to pay 0-3% of the value of the purchase as an additional bank fee. For each cash withdrawal from a foreign ATM, you can expect to pay 0-2.75% of the value of cash withdrawn.
Several advantages make using a debit card the best way to spend abroad for some:
- Convenience – you don’t have to take any extra steps before your holiday to begin paying for things abroad.
- Safer than carrying cash – thieves are less likely to steal your card than cash. You’re also less likely to lose your card since it stays in a slot in your wallet while you travel.
- You can freeze your debit card if you lose it or it gets stolen, so the funds in your bank are protected. However, this is still less secure than a prepaid travel card since – before you freeze the card – there’s a chance the thief will be able to access all your bank funds.
4. Credit Cards
Though there are some benefits to using a credit card in foreign countries, make sure you research the fees your card will charge.
You can expect to pay a 0-3% fee for foreign transactions. For withdrawing cash abroad, it’s significantly more expensive than using a debit card with a 0-5% fee per purchase. What’s more, you’ll be charged interest on your cash withdrawals, ranging from 6.5-7.0%.
However, credit cards do have some benefits, including:
- Convenience – lots of people use their credit cards habitually, and you don’t have to take any extra steps before your holiday to pay for things abroad.
- Safer than carrying cash – like a debit card, thieves are less likely to steal your credit card than cash. You’re also less likely to lose your card since it stays in a slot in your wallet while you travel.
- You can pay the bill later – for many this is the most significant benefit of using a credit card abroad. If paying later makes things easier for you – perhaps you’re waiting on a big payment, but you need funds for your holiday now – this might be the best way to spend abroad.
- Rewards - Some cards offer cashback or rewards linked to spending. If you use it abroad, this could contribute towards your reward.
5. Spending Money Abroad with the HyperJar Card
If you want to avoid fees every time you use your card, the HyperJar prepaid travel card is the best way to spend abroad.
It’s safer to carry than cash, convenient to use, and you don’t have to pay any transaction or withdrawal fees that rack up with a bank card. While you can’t withdraw cash at ATMs, you will benefit from a great exchange rate so your money goes further when you pay by card. You can freeze and unfreeze your card any time.
But there’s more to HyperJar than just a card. You can plan your holiday budget with the HyperJar app, creating different jars for different expenses. You can also share the costs with others, creating a jar that acts as a kitty for a shared activity or night out. Going on a group holiday? Create a jar and everyone can contribute to the cost before you travel. You can send messages in the HyperJar app to remind people that a payment is due - or just add suggestions for places to eat and visit.
Once abroad, it’s easy to top up your HyperJar account with a bank transfer. It’s impossible to get into debt or rack up an overdraft buying more than you should as you can only spend what’s available in your HyperJar account.
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