There are many pitfalls to splashing your euros, dollars or whatever currency you need on holiday, and withdrawing cash with the wrong card deal for you is one of them.
Taking out £100 could lead to an extra £7.99 charge in some cases, and this can add up quicker if you are tapping away on smaller purchases.
This is also an issue when taking out smaller amounts of cash, which can cost you up to an extra £3.30 for the equivalent of just a £10 withdrawal.
However, there are still good deals to be had, which is key when two-thirds of Brits intend on travelling abroad this year.
On average, Brits will spend around £369 for a short trip, compared to £660 for a longer one, according to the Association of British Travel Agents (ABTA).
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‘Packing the right card can really help’
Alastair Douglas, CEO of TotallyMoney, said: “It might not be the most exciting thing about travelling abroad, but packing the right card can really help you make your money go further.
“And with school holidays about to start, it’s worth planning ahead and having a think about how you’ll be spending your money if you’re going away. The best cards will often let you withdraw large amounts of cash, or spend without having to pay any fees or charges – and it can save you a considerable amount of money.”
Douglas added that while many nations are going cashless, there are plenty where cash is king. “So you might want to consider taking a card [that] gives you the choice of both spending and withdrawing money fee-free”, he said.
The finance expert added: “When on holiday, you also need to remember that when asked if you’d like to pay in pounds or the local currency, always go local. That way, you can avoid eye-watering conversion fees, which will eat further into your budget.”
Three card factors to weigh up
To assist you on your travels, the finance expert has also outlined the top debit and credit card providers to consider this summer.
There are three main aspects to consider when selecting which account will hold your overseas currency.
- Non-sterling transaction fees: Often set at around 3% of the value of the transaction, these are applied when you make a payment in a foreign currency.
- Cash withdrawal fees: Withdrawing money from an ATM will usually carry an additional fee. This will be set as a percentage of the value of the transaction, and often with a minimum charge of around £3.
- Dynamic Currency Conversion: When asked if you’d like to pay in pounds or the local currency, you should almost always select the latter to lock in a better rate. If you don’t, the bank or merchant can set their own rate, meaning you might end up spending more than you should.
Debit cards
Douglas says that most current accounts are “quick and easy” to open and has warned people against being put off by opening one before a holiday.
They can be used just for holidays and are a helpful way to budget, and these are the top three providers, alongside comments from Douglas.
1. Chase: The Chase card won’t charge you for foreign purchases or ATM withdrawals – up to £500 per day and up to £1,500 per month. And as an added bonus, you can earn up to £180 in cashback on your spending in the first year.
2. Starling: Last year, Starling was voted the Which? Banking Brand of the Year, and its current account carries zero fees for spending and lets you withdraw up to £300 per day fee-free.
3. Monzo: This current account comes with no exchange rate mark-up, but it is a bit more limiting than the Chase and Starling options. That’s because it will let you withdraw a maximum of £200, fee-free every 30 days (when outside the EEA), and anything over will come with a 3% charge.
At the other end of the table was TSB Bank, which charged 2.99% plus £1 for every transaction, meaning a £10 purchase would cost £11.30.
The lender was also up there with the most expensive providers for withdrawing cash. Withdrawing £50 would cost you an extra £3.49 once the 2.99% and £1.50 charge were factored in.
HSBC proved to be the most expensive for bigger withdrawals. To take out £250 would cost a total of £261.88, once the charges of 2.75% and a 2% ATM fee were added up.
Credit card
Douglas says that you should think carefully before using a credit card abroad, “as it’s easy to start enjoying the sun, and to give into the temptation of spending more than you need to”.
He adds: “It’s also worth remembering that when you take cash out with a credit card, it might show up on your credit file. And although it shouldn’t impact your credit score, lenders might see it as a sign of you being cash-hungry, meaning it could hold you back when applying for credit in the future.”
Here are the top two credit card providers for your travels, with Douglas’ comments:
1. Barclaycard Rewards: As long as you repay the full statement by the due date, Barclaycard Rewards won’t charge you for making purchases or taking money out of the ATM overseas. And while it’s not a huge bonus, it will also give you 0.25% cashback on spending.
2. Halifax Clarity: This is a decent option if you’re only using the card to make purchases. However, once you start taking cash out, you will be charged interest – even if you pay off the balance in full.
The priciest credit card providers were Virgin Money and Metro Bank (when you’re outside of Europe), which came with a 2.99% cost per purchase added on.
Credit card withdrawals are widely not recommended due to the impact they can have on your credit file, and Virgin Money would charge an extra £7.99 for the privilege of taking out £100.
Indeed, even to withdraw £5 would cost you a total of £8.15 with Santander, an additional £3.15.
