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What is the best way to spend money abroad?

What’s the best way to spend money abroad? This may seem a strange question but there are now a wide variety of methods to pay the bills on your travels.

Should you use a prepaid card? Will you be heavily stung by using a credit card? Are travellers’ cheques still a viable option today?

In this guide we assess the different payment systems that are available to you overseas to see which are the safest and most cost-effective.

Money tucked in a passport next to a camera and suitcase 

Preferred payment methods

Paying for goods and services in the UK has become simpler over the last few years, especially in the wake of the Covid-19 lockdowns.

Many of us have become more comfortable with digital forms of payment, including the use of Apple or Google Pay on our mobile phones.

Holding your phone or credit card on a contactless payment device is quick and efficient. The transaction is completed in a matter of seconds.

It also removes the need to handle grubby notes and coins. This is a particular benefit now everyone has become far more focused on cleanliness and hygiene.

Traditional payment systems

Times have changed dramatically over the past couple of decades.

Going on holiday used to require a trip to the Post Office or travel agent to get your money changed up into the local currency.

The existing currency exchange rate between the UK and wherever you were heading would affect the value your cash had overseas.

It meant your £10 might be enough to buy a round of drinks for your friends on one visit – but might barely cover the cost of a coffee during another!

The more safety-conscious might opt for travellers cheques. These were pre-printed cheques for fixed amounts that could be used in place of cash – or exchanged for cash – abroad.

Credit cards were thought to be expensive options with punitive charges ruling them out except in the case of a dire emergency. Only a handful of credit card providers offered cost-effective options.

Payment options abroad

So, what are the options for making payments abroad today? Well, the old favourites of cash and travellers cheques are still used.

But there are plenty of other options. Credit and debit cards – especially specialist ones designed with the traveller in mind – have also become popular.


Is it better to take cash or card abroad?

There’s no simple answer. Different situations might require different methods. 

For example, you’re likely to need some cash when you’re abroad. Not everywhere accepts credit cards so being able to hand money over is useful.

Cash is also straightforward and makes it easier for you to stick to a budget. This is far more challenging when you can put everything straight on the credit card.

However, the biggest risk is security. Having a large amount of notes stuffed into your wallet could make you a target, especially if it’s obvious that you’re a tourist.

Sneaky thieves can part you from your money in a matter of seconds. A quick distraction, momentary confusion, and you can be robbed of everything.

Taking plastic abroad, however, tends to be safer. The security risk is less because if it gets stolen or goes missing then you can contact the card provider and cancel it immediately.

Under the Consumer Credit Act, you’re protected for single card purchases between £100 and £30,000. This provides you with some element of protection.

However, there are plenty of caveats when using credit cards abroad. Whether they’re a cost effective option depends on the interest rates – and terms – that apply.


What’s the safest way to take money abroad?

Cash is obviously the riskiest as you can lose your wallet – or get it stolen. Using your credit card is likely to be the safest as the card provider can cancel it immediately if it goes missing.

However, it probably makes sense to have a combination of cards and cash to cover all eventualities. This also gives you more possible solutions in worst case scenarios.


Using a credit card abroad 

We’ve all come to rely on the practicality of a credit card – but this may prove to be a pricey option abroad unless it’s a specialist one for that purpose.

Generally, a loading fee is added to the exchange rate by your bank when you use a credit card abroad.

There’s an added problem if you use your credit card to withdraw cash while overseas. Alongside the loading fee, there’s usually a charge for using the ATM. 

Therefore, once you factor in all the various additional charges, the items you’ve bought may suddenly end up costing you a lot more than anticipated.

It’s a similar situation with debit cards. 

They can be practical and get you out of a hole when required. But they can also be expensive as non-sterling transaction fees are likely to be charged every time.

However, some cards can take away the stress, without costing you a packet. These specialist credit and debit cards could save you a small fortune.

The best of the bunch shouldn’t charge any fees or interest on spending, as well as overseas cash withdrawals. This is as long as the bill is paid in full each month.

They may also come with perks such as cash back or access to various discounts and services. Some, meanwhile, might just charge you for cash withdrawals.

Take your time to look at the options and double check with the provider if you’re in any way unclear about the possible fees.


How do prepaid travel cards work?

If you want to stick to a budget without the security risk of cash, then a prepaid travel card may be the best option. 

These work in a similar way to debit cards in that they can be used to withdraw cash – Or you can hand them over at the till to pay for goods and services.

You also have a PIN to use the card and confirm transactions. Similarly to credit and debit cards, if it goes missing, you need to contact the provider immediately.

However, there’s one major difference. You load the money onto the card in advance and there isn’t a handy overdraft to dip into if you overspend.

There are also different types of prepaid cards. 

For example, there are single currency cards where your pounds are converted to the currency of choice when you load them – locking in that day’s exchange rate.

Others load in sterling and each time you spend abroad. It’s converted at that point into the chosen currency at the current exchange rate. 

Then there are multi-currency cards. Take your time to consider the options.


The benefits of using a prepaid travel card

Putting money onto a prepaid card before you leave means you can plan ahead better.

As you’re limited to spending just the amount on the card, there’s no risk of you going into debt. They can also be used worldwide and are cheap to use abroad.

However, there are potential disadvantages. Charges can sometimes apply for loading the card with cash. There may also be application fees.

Therefore, it’s important to understand the small print before taking one out. If in any doubt, ask questions of the provider. Research is vital in this area.

Also, the positive of not allowing you to go into debt can also be a potential negative. If the card is empty, you won’t be able to use it in an emergency.


What’s the best travel money card?

So, what is the cheapest way to pay abroad?

You’ll need to do your own research to establish which one best meets your needs. This is a fast-moving, competitive marketplace with new products being launched regularly. 

Shop around for the best deals and pay particular attention to factors such as the exchange fees that may be charged. In many cases, it might be wise to have a selection of payment options.

For example, you could have:

  • Cash for small transactions in out-of-the-way places
  • A prepaid card for most of your spending
  • A credit card for emergencies 

How to keep your money safe when you travel

Don’t just put your money in a pocket – this is practically inviting thieves to pounce. Consider a money belt under your shirt or some form of anti-theft bag. Make sure it’s also out of sight.

It’s also worth splitting your money up rather than having it all in one place. You can keep it in a couple of places while on your person – as well as some maybe in the hotel safe.

Stay alert. If you’re in a group make sure you watch out for anything suspicious or someone trying to distract you, especially in crowds.


Staying safe abroad

Make sure you take the contact details of your bank and credit card provider with you. Therefore, if the worst happens and your card gets taken you know how to reach them quickly.

It’s also worth doing your research on countries and cities before you arrive. There may well be some no-go areas that are risky for tourists, so avoiding them makes sense.

You can find out specific foreign travel advice about the country to which you’re travelling from the UK Government before you go. 


Consider travel insurance

You shouldn’t go abroad without having adequate travel insurance in place.

You can get cover quickly and easily for short trips. However, an annual travel insurance policy might probably work out cheaper if you plan to travel abroad at least twice in the year. 

IF you’re a victim of theft, mugging or pickpocketing while abroad, your travel insurance policy could help reclaim your lost cash.

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