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What’s the best way to spend when you're abroad?

How do you make the most of your money while on holiday abroad? Cash or card? We discuss the pros and cons of each.

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If you're heading abroad for a break, you're going to need some spending money. And getting the most for your money is important. So what's the best way to pay when you're abroad?

Local cash is probably the easiest (and cheapest) way to spend abroad.

The main advantages are:

  • You won’t be charged any transaction fees
  • It’s accepted everywhere

The main disadvantages are:

  • Carrying large amounts of cash around is pretty inconvenient and not particularly safe.
  • If you need a less frequently used currency, you may have to order it in advance.
  • Finding the best exchange rates can be difficult and time-consuming.

The deal you get will largely depend on the exchange rate (the value of the dollar compared to the foreign currency).

The exchange rate changes regularly as the value of the dollar goes up and down nearly every day. And exchange rates can even vary a lot between providers. The fairest exchange rate possible is the ‘mid-market rate’, or interbank rate. This is the exchange rate used by banks and other traders when they buy and sell currency between each other. However, the general public are typically given a less favourable rate, as banks and foreign exchange bureaus want to make a profit.

Here are a few tips to help you get the best deal on foreign cash:

  • If you’ve booked your trip some months in advance, it’s worth monitoring the exchange rate using a tool such as’s currency monitor. That way, you can buy foreign currency when the rate is more favourable.
  • Shop around using a comparison tool, like The Currency Shop.
  • Avoid exchanging money at airports and hotels - they usually have the worst rates.
  • If you want to withdraw cash from an ATM when you’re abroad, always do it in the local currency. This guarantees the mid-market rate. However, your bank may charge ATM fees and foreign transaction fees (more on this later).

If you don't want to pay for your whole holiday in cash, you can use a credit or debit card.

The main advantages are:

  • Credit and debit cards are typically safer than cash - they offer you more protection if they're lost or stolen, as you can easily cancel them if you identify any fraudulent activity

  • They are more convenient - you pay for things as and when you buy them, leaving you with less leftover cash to use up at the end of your holiday

The main disadvantages are:

  • You can run into acceptance issues. Card machines can often be temperamental. While cards are usually widely accepted in tourist hotspots, smaller merchants and those outside busy areas may only take cash. Make sure to carry some cash for emergencies.

  • They can also be expensive to use. Credit and debit cards tend to charge a fee on every foreign transaction, usually around 3%. Most will also charge an ATM withdrawal fee.

Credit and debit cards for travel

Not all credit cards and debit cards charge expensive foreign transaction fees. In fact, there are cards designed specifically for travel which don’t charge any fees at all.

To make the most of these savings, always perform transactions in the local currency. This will ensure you get the best exchange rate available.

Need a credit card for travel? You can see a huge range of credit cards in the Offers section of your ClearScore account.

Credit cards vs debit cards: which is better?

  • Debit cards are better for ATM withdrawals. Just like when you're at home, withdrawing cash with your credit card will start attracting steep interest rates immediately.
  • Credit cards are generally better for purchases. Most lenders offer purchase protection policies, which mean you’ll have a right to a refund if something goes wrong.

Prepaid cards, such as the Travelex Money Card, work just like credit and debit cards.

However, they have two main advantages:

  • They’re safer - prepaid cards are not linked to your bank account. Instead, you top them up with as much cash as you want. This means you stand to lose less should your card be lost or stolen. It’s also much easier to stick to your budget and control your spending.

  • They’re cheaper - some foreign exchange specialists have travel-centric prepaid cards, as do new entrants to the market like Revolut.

You can usually hold several different currencies on the same card, which means you only need to deal with the exchange rate once. With most of these cards, you also won’t be charged foreign transaction fees or ATM withdrawal fees.

Of course, they have disadvantages too:

  • Limits apply - for instance, you might be limited in the number of transactions you can make per day. Or you could be charged a fee if you withdraw more than a certain amount per month.

  • Paying a deposit can be tricky - hotels and car rental agencies sometimes charge an amount to your card as a deposit. Many won’t accept a prepaid card for this. If they do, you may have to top up again to keep using your card.

Key Highlights

  1. Local cash is normally the easiest way to pay abroad. However, you’ll need to shop around for a good exchange rate.
  2. Unless they’re designed for travellers, credit cards and debit cards are usually expensive to use abroad.
  3. Avoid withdrawing money with a credit card, as this can attract steep fees and interest.
  4. Always pay in the local currency whenever you use a credit, debit or prepaid card (this usually gives you the best exchange rate).

Frankie takes the often confusing world of finance and makes it clear and simple, to help you get your money sorted.