Travel money

When planning to travel abroad, you need to think about how you will be paying for things.

Here is some guidance about each method of payment:

Cash

It can be useful to have some currency for occasions when a card cannot be accepted, for instance getting a taxi from the airport to your accommodation, and for tipping.

When buying foreign currency, do not leave it to the last minute and always shop around for the best rate.  You can make the purchase at a number of outlets including the Post Office, banks and bureaux de change. Be aware that purchasing foreign currency at an airport or ferry terminal is likely to be one of the more expensive options and you will not get the best rate of exchange.

Some of the more competitive deals are available online, but check delivery charges before ordering.  Some online currency ordering services allow you to pick up your cash at the airport. This combines the convenience of getting your travel money just before flying, but means should also benefit from a better exchange rate.

Safety

Carrying cash when you are abroad can have risks, so it is better to only take out what you need that day/evening, locking the remainder away, and keep the currency on your person, such as in a money belt. If there is more than one of you in the travelling party, split the money between you.

Travel insurance will usually only cover you up to a certain amount of cash if it is lost or stolen, typically between £200 and £500. Check your travel insurance policy to see what you will be covered for.

Travellers’ cheques

Travellers’ cheques are still popular with many consumers. They are safer than carrying around cash, and can be replaced if they are lost or stolen, provided you have a note of the serial number on each cheque.

When you purchase travellers cheques, you need to sign each one (usually in the top left-hand corner). When you spend or cash in your travellers cheques, you will be required to countersign each one a second time in the presence of the person accepting it. This is so the two signatures on the travellers’ cheque can be compared and your identity verified.

Another advantage is that travellers’ cheques do not carry expiry dates. However, one disadvantage is that you may need to queue at a local bank or bureau de change to have them exchanged for cash.

Getting the best deal

As with foreign currency, it is worth shopping around when you buy travellers cheques in a foreign currency. If you are buying cheques in euros or US dollars, you are unlikely to be charged commission. However, if you buy sterling travellers cheques for use abroad, you will probably have to pay commission of around 1%. You should take this into consideration if you are flying to a destination that might accept travellers’ cheques in a currency other than sterling.

Debit and credit card

Be aware that many debit and credit card providers can apply a substantial charge for making a payment or withdrawal abroad.  These charges include a ‘foreign exchange commission’ or 'foreign loading fee' each time the card is used; interest charges, and cash withdrawal fees when using the card at an ATM.

However, there are some cards that will not incur a charge, so do your research first, and consider using an independent comparison website or Which? reviews to find a card that best suits you and your spending behaviour.

If your credit card offers free use abroad, it can be worth using for purchases costing £100 up to £30,000, as it provides extra protection under section 75 of the Consumer Credit Act – giving you the right to claim money back from the card provider if something goes wrong.

For credit card purchases costing less than £100, or all debit card purchases, you can use the card provider’s Chargeback scheme to claim money back.  Check the terms and conditions with your card provider.

It is good practice to tell your debit or credit card provider you are planning to use your card abroad, to avoid having your card blocked for what may appear to be an ‘unusual transaction’.

Prepaid cards

Prepaid travel cards, also known as currency cards, allow you to load them before you go abroad, and then simply use them as you would use any debit card to spend or withdraw cash.

The advantage of having a card pre-loaded is that it allows you to keep control of your spending, and to lock in an exchange rate before you travel.

As with all financial products, check the terms and conditions carefully. Also be aware that these types of cards are not universally accepted by all traders; in particular, there have been problems with car hire companies and service stations.

Exchange rates

Overseas retailers will often ask if you would like to pay in the local currency or sterling when you are settling a bill.

Unless you can be sure the exchange rate you would be getting is competitive for paying in pounds sterling is competitive, it is generally advisable to pay in the local currency.