Millions of people are counting down the days until they head off abroad this summer. But when you are doing pre-holiday admin, don’t forget about the things that will help keep costs down, and make for a smoother trip.
Pick the wrong plastic, for example, and you will end up spending more than you need to.
So if your holiday is still a few weeks away, now is the time to consider applying for a fee-free payment card or account.
Also check what the deal is regarding how much you will have to pay for mobile phone data, calls and texts, as there may be steps you can take to cut those costs.
Meanwhile, you may want to invest in a bag specifically designed to fit in the overhead locker on a plane. We have rounded up some of the best.
Pack the right card
British consumers who use their debit cards to pay for everything contactlessly have been warned that they need to either ditch the habit while abroad or switch to a fee-free payment card. If they don’t, they could easily rack up £50-plus in bank charges.
For years, Guardian Money has been warning about the perils of using the wrong credit and debit cards while abroad; however, the boom in contactless, and the fact that millions of us now pay this way without thinking twice, means it has never been more pertinent.
“Customers could make considerable savings just by packing the right card,” says the website TotallyMoney, which commissioned research on the best and worst cards for spending abroad this summer.
For example, how many TSB debit card users are aware they will pay a £1 charge plus 2.99% of the price paid every time they use their debit card outside Europe? Make a £50 purchase and £52.49 will be deducted from your bank balance (it is £51.49 within Europe).
That’s because TSB is one of the banks that applies a foreign currency purchase fee (in TSB’s case, £1) on each transaction outside Europe, in addition to the conversion fee when you buy something in anything other than sterling, so if you make lots of small purchases you could face a hefty bill.
View image in fullscreenWith more people making contactless payments, using the right credit or debit card abroad is important. Photograph: ljubaphoto/Getty Images
TSB also has two separate charges for using cash machines abroad – a 2.99% fee and a 1.5% fee, with a £2 minimum on the latter – although the second of those fees doesn’t apply in Europe.
TSB points out that it also offers the Spend & Save Plus account, with no fees on debit card transactions worldwide. There is a £3-a-month charge but as long you make 20 transactions a month, there is £5-a-month cashback.
While TSB was at or near the bottom in TotallyMoney’s tables, it is by no means alone. If you hold a debit card linked to a basic, non-fee-paying account with any of the big names on the high street, you will typically pay a 2.75% to 2.99% overseas usage fee, adding £2.75 to £2.99 to every £100 purchase, and often higher fees to take cash from ATMs.
Stopping on the way to the beach to buy a drink and a bite to eat for £5 could end up costing you an extra £1.15 in feesTotallyMoney’s Alastair Douglas
Use a basic HSBC debit card to make a £250 foreign cash withdrawal, and you will pay £11.88 (there’s a currency conversion fee of 2.75%, plus cash fee of 2% where the minimum is £1.75 and the maximum £5), according to TotallyMoney, which commissioned MoneyComms to crunch the numbers.
However, with a bit of forward planning and a decent credit rating, it is possible to slash these charges to zero, or virtually zero. Alastair Douglas, who runs TotallyMoney, says consumers may need to readjust their spending habits while abroad.
“Stopping on the way to the beach to buy a drink and a bite to eat for £5 could end up costing you an extra £1.15 in fees. While it might not seem much at first, lots of these small transactions can quickly add up,” he adds.
If you plan to take your existing plastic, at least check the overseas charges that apply before you set off, so you know what the deal is and can adapt your behaviour if necessary.
Switch your bank account?
If you are fed up with your bank and looking for an excuse to switch, fee-free foreign spending could be the spur, particularly if you are abroad a lot.
Current accounts from Chase, Starling, Nationwide (FlexPlus) and HSBC (Global Money) all offer fee-free purchases and free ATM withdrawals abroad.
For example, Chase – the US bank JP Morgan’s UK banking brand – says: “We don’t charge fees when you use your card abroad, and we’ll apply the current Mastercard exchange rate to any purchases you make in the local currency.”
Chase offers the added bonus of 1% cashback on debit card spending at home and abroad for the first year.
View image in fullscreenChase says: ‘We don’t charge fees when you use your card abroad.’ Photograph: Chase/Reuters
Nationwide’s FlexPlus account costs £13 a month but, in addition to no fees for using your debit card abroad, you get various other benefits, including worldwide travel insurance and European breakdown cover.
HSBC’s Global Money account is available to its current account customers. You can apply “in minutes” via the HSBC app.
Try a fee-free credit card
If switching bank accounts is a step too far, the simpler option is to apply for a credit card that lets you spend or withdraw cash abroad with no fees.
Two really stand out. The first is the Halifax Clarity card. The application is all online and you should get your card within seven working days. New customers are also being offered £20 cashback.
The only slight downside is that users pay interest on ATM withdrawals, with £100 working out at about £2.30 interest over 30 days, according to the research.
The other is Barclaycard Rewards, which is completely fee-free for purchases and ATM withdrawals, provided users pay their statement in full by the due date. There is also 0.25% cashback on spending.
The currency con
When using your card, Douglas warns that you should watch out for dynamic currency conversion at shops, restaurants and, increasingly, ATMs. When the payment terminal arrives, users can choose to pay in pounds or the local currency. DCC can add as much as 14% to the bill. The advice is to pay or withdraw in the local currency.
Prepaid cards – watch out
These can sometimes be useful for people on a tight budget or who do not want to carry lots of cash. They let you load money on in pounds and spend in another currency.
In some cases, these fees can put a dent in, or ultimately even wipe out, your balance
The consumer body Which? says those designed for spending abroad are usually cheaper than spending on your everyday debit or credit card. But it adds that “almost all prepaid cards currently on the market come with a variety of fees and charges”.
In some cases, these fees can put a dent in, or ultimately even wipe out, your balance.
We would recommend you closely examine the T&Cs before you sign up to make sure the card works for you.
Other options
The Currensea card is a relatively recent entrant that offers an alternative by linking up to your existing bank account – allowing people to spend directly from their current account when abroad, with “no hidden fees”.
TotallyMoney says this means people won’t need to worry about preloading it with currency before they set off, “and the FX fees are a fraction of those charged by most UK debit and credit cards”.
There are three price plans, including one called Essential with no annual fee.
A good deal on currency
If you are one of those people who likes to arrive with a bundle of local cash, the Travel Money Max site – run by Martin Lewis’s MoneySavingExpert.com – will tell you the absolute best deals.
Simply type in which currency you want, how much, when you want it and whether you want home delivery or collection from a bureau, and the site will give you various options and show you what you would get after all charges.
View image in fullscreenRolled-up euro banknotes. Photograph: malerapaso/Getty Images
When we looked this week, some of the supermarkets and retailers – such as John Lewis, Marks & Spencer, Sainsbury’s, Tesco and Asda – were looking pretty competitive.
What you should really avoid doing is buying currency at the airport.
“Don’t change cash at the airport – rates are hideous,” MoneySavingExpert says.
Choose ATMs carefully
Last, don’t forget to shop around while using foreign ATMs. While we have got used to them being free to use in the UK, in many other countries, particularly outside Europe, they charge – and at wildly different rates.
A Google search will often show the cheapest or free options.
