Ways to avoid bank charges when spending abroad

Going back 10-20 years it was a ritual to go to the currency exchange office to get your cash out before a trip. But now it’s quite unusual to go cash-only on holiday.

Much like the UK a lot of countries have moved to digital spending which is much safer than carrying around loads of cash.

Using your card abroad

Most credit and debit cards will let you spend abroad, but not all of them allow you to do this for free. Some will charge you for the privilege, adding on foreign transaction fees after the currency exchange. These are officially called ‘non-sterling transaction fees’ and are around 3%, so if you spend £100 it will cost you £103. They'll do this regardless of whether you spend with the physical card, or using the card via Apple or Google pay.

On top of this some debit cards charge a flat fee each and every time you spend overseas, regardless of how much. And withdrawing cash can add fees and interest as well.

How to avoid bank charges abroad

Travel focused providers

Some providers offer fee-free spending abroad and even ATM withdrawals so if you’re going to be using a card abroad it might be worth opening a new account (if you don’t have one already).

Chase gives 1% cashback on most spending, even abroad, and offers a near perfect exchange rate. With First Direct all overseas spending and ATM withdrawals are fee-free and interest-free, and you can get a switching bonus if you move your account to them.

I have a Monzo card and it’s fee-free to spend abroad, and they pass the Mastercard exchange rate directly to the customer with no extra charges. Depending on how you use Monzo you may have a limit on how much you can withdraw. I have Monzo Plus which gives unlimited fee- free withdrawals in the European Economic Area and £400 fee-free every 30 days outside the EEA. Wise offer a similar service, with the added bonus that you can create a foreign currency sub-account and convert your travel money into it. All transactions in the matching currency will come out of that sub-account first, so you can more easily track your spending.

Use a prepaid travel card

Lots of places offer specific currency cards where you can load on your currency and lock in a rate in advance. Some of them charge fees or take a cut of the exchange rate, but they can offer you security that you’re not using your account card.

I used to have one from the Post Office that I uploaded my spending money on, but Revolut and Wise can work in a similar way.

Spend in local currency

When you use a card abroad you’ll typically be asked if you want to pay in pounds or in local currency. If there is an option, always go for local currency as your card will do the currency exchange, offering the best rate. If the retailer does the currency conversion rates are likely to end up costing you more.

Spend rather than withdraw cash

With most cards it’s likely to be cheaper to pay via card then going to a local ATM to withdraw cash. Even for cards that charge fees on a transaction you’ll pay a non-sterling transaction charge, but you’ll pay a fee and interest on cash withdrawals.

Since Brexit, more ATMs abroad have started to charge higher fees so keep an eye out.