Foreign Perspectives

I find that very few people give any thought to how they should take their money when they go on holiday beyond saying they’d like $200 or whatever to the travel agent and thereby getting ripped off. So, to help you decide, here’s a little guide:

The first thing to do is to check what currency is used at your destination. If it’s a mainstream currency such as dollars or euros then it’s best to take the money in that form. However, if you’re going off to less mainstream countries, check which of the principal currencies is most commonly used there (if in doubt, take dollars). Sometimes you can’t get the currency used outside the country or can’t get sensible amounts of it so you need to take dollars or euros eg India used to only allow you to import £5 of their currency which wasn’t really worthwhile getting.

What about taking cash? Well, if you’re in America then it’s always worthwhile to take, say, $100 with you (nothing larger than a $20 bill) and likewise for those living in euro-land. However, if that’s not the currency of the country you’re going to, it’s going to be expensive to convert to the local currency. The other option is to buy some of the local currency before you go but beware that this is usually quite expensive and not as cheap as you would think from the advertisements eg when I bought $150 for about £100 in a shop advertising that the commission was £3.50, the actual charge was over £10 ie 10%. The other main downside of cash is that if it’s stolen, it’s gone as holiday insurance rarely covers cash to any significant amount so if you are taking it, limit the amount to $100 or so. If you buy foreign currency on a card, it counts as a cash advance with all the charges that implies.

Travellers cheques (or travelers checks) are much better than cash in that they can be replaced fairly easily if stolen (keep a note of the numbers, date bought and where you bought them). However, they are equally expensive to purchase and there is often a charge to cash them too. If you’re going to America or Canada you can use dollar cheques as though they were cash in shops (even where they say “no checks accepted”). Again, take them in the currency of the country you’re going to if it’s a mainstream one, otherwise dollars or euros. If you have any left over after your holiday, keep them rather than cash them in your bank as you can use them later (there is no expiry date) and this will save you paying the commission again. If you buy travellers cheques on a card, it counts as a cash advance with all the charges that implies. Make sure that your travellers cheques come with the Visa or Mastercard or American Express brands as others may not be accepted. You can’t use American Express travellers cheques in Cuba or Vietnam nor any issued by American banks.

Credit/Charge cards are used nearly everywhere these days. If you don’t have a card already, you should get one (Visa or Mastercard) even if you only plan to use it for emergencies. Bear in mind that not everywhere accepts them though and also that not all places take both Visa and Mastercard. If pushed, you can get cash on these cards either in an ATM or over the counter in a bank but save this for emergencies only as you’ll get charged a cash advance fee, currency conversion fee and interest. The exchange rate used is much better than you’ll get for either cash or travellers cheques so that $150 that I got would have cost me around £2.75 vs the £10 that I was charged had I used the card in a shop, around £7 had I used it to get cash (assuming I’d paid the full balance when I returned home). In those countries which don’t have ATMs, you can usually still use the card to buy things and get cash over the counter in banks. I say usually because it isn’t always the case eg in India we couldn’t use the card in shops and the banks weren’t practical either.

Credit/Charge cards come in four basic international-use versions. Visa/Mastercard are the most accepted worldwide but note that in some countries one may be more accepted than the other and in particular don’t rely on shops accepting both cards so, if you can, take both types. American Express is the next most accepted but it is widely accepted only in countries that are “American/British” influenced; the one principle advantage it has is that it can be replaced by any American Express office although note that these are not very widespread and may be difficult to get to. One thing to avoid is their Travellers Check Card: best to get one of their proper cards if you can, but only if it’s free in your country. Diners Club is very far behind Amex in acceptance worldwide and not worth paying for. You cannot use cards issued by American banks in Cuba or Vietnam which notably includes MBNA (owned by Bank of America). Discover isn’t accepted outside America. JCB acceptance is patchy: good where Japanese tourists are common, poor otherwise.

Debit cards are almost always branded Visa/Electron/Plus or Mastercard/Maestro/Cirrus and work in the corresponding systems however sometimes you may be issued with a card which can only be used in your own country: check that one of the Visa/Electron/Plus or Mastercard/Maestro/Cirrus symbols are on your card as if they aren’t you probably can’t use the card internationally. Charges are as per credit cards except that you don’t get charged interest on cash advances.

Cash cards are often limited to the country in which they are issued but if they have a Plus or Cirrus symbol on them, you can use them abroad too (this was to have changed in 2008 with the introduction of the Single European Payment Area ie all European cards should be useable in all European countries, but hasn’t [as of 2010]). Charges are usually the same as for debit cards in ATMs. The principle advantage of having a cash card is that they are a lot less attractive for thieves as they can’t be used without the PIN.

Prepaid cards are becoming increasingly popular with travel agents, mainly because they see it as a way of getting even more commission than they can on travellers cheques. Whilst buying these from a travel agent is usually just a way to pay them even more commission, there are some very good ones around which will save you a lot. See our detailed article for more on these. For example, had I got my $150 on a card, the cost would have been close to zero if I had used the pretty much perfect FairFX card.

As well as the above options you also have a choice of providers of the various methods of payment. Travellers cheques may be offered “commission free” by your bank (and the UK Post Office), although note that this is not the same as “free” eg my $150 would have cost around £7 “commission free” (vs £10 with commission).

In the UK, the Nationwide Building Society offer a totally free debit card (ie no transaction fees, no ATM fees, no currency conversion fees) [sadly withdrawn from November 2010] so my $150 would have cost nothing; their credit card is almost as good in that it’s free for purchases but is a bit expensive for cash advances. Most UK cheque accounts come with a debit card with Maestro or Visa Debit facilities. For a UK cash card you seem to be limited to Royal Bank of Scotlands Instant Savings account and the Coventry Building Society’s cash cards (both Plus system).

In America you can get quite a range of systems listed on the card eg NYCE, Star, etc. but in reality the only two that matter are Plus and Cirrus for cash, Visa and Mastercard/Maestro for debit/credit card use as none of the others are accepted internationally. The costs for international use are rarely clearly laid out on American card agreements and smaller banks may not even know how much you’ll be charged for using your card abroad.

If you use one of the banks within the Global Alliance banks (BNPParibas, Bank of Nova Scotia, Bank of America, Barclays, Deutsche Bank and Westpac) you can use machines from one of the other Global Alliance banks without transaction charges (currency conversion fees still apply).

This article is part of our series on holiday planning which covers things like how to book your holiday, how to take your holiday money, what to pack, etc.

[updated October 2010]

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