Last summer I clocked the fact that I had three 20-euro notes in my wallet. They had been sitting there unused for a good four or five years despite my having travelled to Europe on a regular basis. And they are still there. Because in most European countries, there really is no longer any need to carry cash. As in this country, you can pay for virtually everything with a card.
Not only are cards more secure, and more convenient, they can be cheaper than paying for things in cash. The rates of exchange when you buy currency in advance mean that you are guaranteed to lose out – perhaps by three per cent if you order online, probably much more if you turn up at an airport bureau de change.
And most cards can also offer you additional protections. Debit cards have cover against theft and fraud both at home or abroad and credit cards (and some debit cards) have additional protection – notably against financial failures. They are also useful if you have to leave a deposit in order to hire a car.
But not all cards are alike. Many charge you simply for the privilege of using the card abroad – typically 2.99 per cent extra on everything you buy and three per cent or more if you use it to withdraw cash from an ATM. What’s more, they may also offer you an inferior exchange rate. So you are hit by a double whammy each time. And, of course, if you don’t pay off your credit card bill in full when you get home, you might easily be charged another 2 per cent or more for each month the balance is outstanding.
Pick the right card, however, and you will avoid all that and potentially make a real difference to your holiday costs. A select few offer exchange rates which haven’t been skewed against you and don’t add transaction charges when you use them overseas.
Which? currently highlights three credit cards which do not make such charges: the Halifax Clarity Credit Card, the Bip Credit Card (both MasterCard) and the Barclaycard Rewards Visa. For debit cards, I personally use a Monzo account, which doesn’t load the exchange rate and imposes no fees on overseas use (though there is a limit on fee-free cash withdrawals). Starling Bank and the First Direct 1st Account offer a similar deal.
But remember – just because a credit card or bank account suits your overseas spending, it doesn’t mean it is the best card overall. There may be charges in other areas which negate the advantages offered on overseas usage. And there may also be advantages. For example, as well as using a Monzo card I also pay £13 a month for a Nationwide FlexPlus account, partly because the fee includes annual travel insurance and breakdown cover, but also because it is free of transaction charges for overseas purchases and cash withdrawals.
There is one other option often promoted to travellers and holidaymakers – so called pre-paid currency cards. There are different types which work in different ways, but the main principle is the same: you deposit money on the card in advance and use it while you are travelling.
Many claim to offer excellent, or perfect exchange rates, but I’ve never seen the point of such cards unless, perhaps, you want to use them as a budgeting tool or to give as a back up to offspring travelling on a year off. You are bound, for example, to end up leaving money on the card. And while the headline deal on making transactions can look tempting – there are plenty of ways that the card issuer may try to make money out of you.
Which? recently listed eight different types of fees which can be levied – from a monthly service charge to an “inactivity” fee payable if you don’t use your card enough. To my mind, the report simply confirms how complicated it is to work out whether or not you are getting a reasonable deal or not.
For more travel money advice, here are the 10 biggest mistakes to avoid with your holiday cash this summer.
