The Best Way to Spend Money Abroad (Low Fees & FX Rates in the UK)

UK-based travel money providers (like Tesco Money, John Lewis, and many more) are often recommended by platforms like MoneySuperMarket, Money.co.uk, and MoneySavingExpert. While these travel money exchangers offer convenience with cash delivery or over the counter pick-up, they often do so at a big cost. High fixed fees and weak exchange rates distort the transparency of the service. Fortunately, there are smarter, more cost-effective ways to take money abroad and spend it that are devoid of these hidden fees.

In this guide, we walk through different spending options such as prepaid travel cards, debit cards, credit cards, and money exchange platforms in the UK. We break down the costs and fees involved in taking money abroad for holiday and we highlight prepaid travel cards like Revolut and Wise, debit cards like those issued by Starling Bank, and some credit cards as the top-tier options.

Leverage Prepaid Travel Cards While Abroad

When typical travel money providers sell you foreign currency, they charge a fixed service fee and they apply a weaker exchange rate than the real mid-market rate. This markup is known as an exchange rate margin, which they pocket as a profit. As we go down the list, we will see this hidden fee get more and more costly.

One solution to lower these costs is to use prepaid multi-currency cards from providers like Revolut and Wise. These cards enable you to hold and spend in local currencies, circumventing exchange rate margins. After loading your card with GBP, it is seamlessly converted to your destination currency at the best exchange rates on the market.

Revolut

Revolut is our top choice for travel money in the UK because it charges zero fees for first £1,000 per month that you exchange. It provides access to 20+ currencies too. The platform works entirely by desktop or smartphone, and they send you a debit card to access your travel money. After the fair usage limit, Revolut charges 1% of the total for Standard plan customers. If you upgrade to their Premium, Metal, or Ultra plans, then you the fair usage limit will be completely lifted.

What's just as impressive is Revolut's exchange rate fees. While markups increase on the weekends, the average markup is a minuscule 0.2%. For euros (€), the most popular currency used for travel money in the UK, Revolut sometimes applies an exchange rate that is actually stronger than the European Central Bank's mid-market rate. This means that you may gain when you exchange your GBP to EUR for your next holiday in the Eurozone.*

You can use Revolut's debit card to use at ATMs for local cash. As a Standard customer, you'd get £200 month of fee-free withdrawals.

*The GBP to EUR exchange rate shown in the image above is not guaranteed. The image was taken on 28/07/2023.

Learn more: Read our in-depth Revolut review or visit their website.

Wise Multi-Currency Account

On the other hand, the Wise multi-currency account offers 50+ currencies and an ATM-friendly debit card. The power of the Wise multi-currency account comes from never charging hidden exchange rate margin fees. Instead, it charges a transparent service fee that ranges from 0.3% to around 2% depending on the currency.

The Wise account even comes with checking account details for 10 countries, including a UK sort code, US account number, EU IBAN, and more. This means you can receive money locally from those countries with direct debits, SEPA payments, and other methods.

For holiday cash, you can use the Wise debit card for 2 free ATM withdrawals for a total of £200 per month.

Learn more: Read our in-depth Wise review or visit their website.

Make the Most of Debit Cards

If you choose to spend money abroad with a debit card, make sure that it waives international transaction fees. Even if you find a card that does not charge these fees, it is good to be aware that a small margin may still be lost to exchange rates set by Visa and MasterCard.

The Visa and Mastercard currency conversion rates are very low (around 0.2%-0.5%), which is why we think debit cards that waive foreign transaction fees are still good options. You can track the Visa exchange rate here and the MasterCard exchange rate here.

Starling Bank

Starling Bank stands out as one of the premier debit cards for international travel for customers in the UK, thanks to its absence of foreign transaction fees. If you only hold a GBP account with Starling Bank, your card will use the live MasterCard exchange rate, closely aligning with the mid-market rate. Additionally, Starling Bank offers free EUR accounts, making it an excellent choice for Eurozone travel. Your Starling Bank debit card will access these EUR account balances, allowing it to function as a local Eurozone card.

Notably, Starling Bank stands out for its full exemption from ATM fees, both domestically and internationally. Regardless of withdrawal amount or frequency, Starling Bank does not charge any fees for ATM transactions. While third-party fees from ATM owners may still apply, this feature establishes Starling Bank as the premier debit card for international travel among UK residents and citizens.

More info: Read our in-depth Starling Bank review or visit their website.

Maximising Benefits from Credit Cards

Credit cards can be advantageous for international spending if they waive international transaction fees. Moreover, credit cards provide a layer of fraud protection, allowing you to dispute suspicious transactions while abroad.

If you're enrolled in a rewards program, credit cards can enhance the value of your spending. Barclays, Halifax, Chase, and HSBC all offer a wide range of high-quality credit cards specialised for travel, which you may apply for if you have an eligible credit history.

Things to Consider Before Spending Abroad With a Credit Card

Cash advance fees and interest rates are aspects to avoid when using credit cards. While credit cards offer fraud protection and lines of credit, using them for ATM cash withdrawals can result in higher fees. For alternatives with free ATM withdrawal allowances, we recommend options like Wise, Starling, or Revolut.

Keep an eye on your monthly balances to ensure your ability to set up a full repayment each month. Interest accrued on your monthly statement can negatively your credit score and can burn a hole through your pocket over time.

Exchanging Currency Beforehand for Cash

Many businesses, including specialist currency providers and supermarkets, allow you to order your travel money online. This is normally known as a “Click and Collect” service. You can then visit a local store and pick up your foreign currency.

This option, while frequently endorsed by companies like MoneySuperMarket, Money.co.uk, and MoneySavingExpert, can be costly due to exchange rates and service fees. A more cost-effective alternative is using local ATMs with your prepaid travel card or debit card during your holiday abroad.

A “Click and Collect” service typically charges a £5 - £10 fixed fee and a 2% - 5% exchange rate margin.

Traveler's Cheques

Established as a secure form of carrying money on travels, Traveler's Cheques provide an alternative to handling physical cash. These cheques act like a guaranteed form of payment from a issuing institution like a bank, allowing travellers to pay for goods and services in different locations. Unlike lost or stolen cash, they come with a built-in insurance: they can be replaced if lost or stolen, giving users an added layer of financial protection.

However, the exchange rates used by banks to issue these cheques can be as unfavorable or even worse than traditional travel money exchangers in the UK. Besides, the acceptance of Traveler's Cheques is waning, with many establishments preferring cards or local currency instead. This limits their flexibility compared to other forms of payment like prepaid cards or debit cards.

High-Street Banks

Exchanging money at high street banks or airport currency exchange bureaux is usually unfavorable for travelers. These places often charge fixed fees of £10 or more and offer non-transparent exchange rates, resulting in hidden costs. Airport exchange rates can exceed 17% markup, causing significant losses.

Be cautious of "no fee" exchanges at banks or bureaux too, as they almost always incorporate hidden exchange rate margins. While these options can be emergency choices at airports, they are generally not advisable for UK travel money.

For optimal value, consider a travel debit card or multi-currency account with transparent and competitive rates.

Travel Money and Holiday Cash Tips

In summary, for a cost-effective international travel experience, keep in mind the following tips for taking money abroad for your next holiday:

1. Always choose to pay in local currency while using a POS machine or ATM (i.e. EUR in Eurozone, USD in the US, etc).
2. Don't use debit or credit cards that charge foreign transaction fees.
3. To spend like a local, maintain balances in local currencies by using multi-currency accounts.
4. The Visa and Mastercard exchange rate will likely be better than UK travel money/holiday cash exchangers.
5. If using holiday cash exchange companies, early planning (over a month) can reduce costs.