Travel money guide 2024

Cash, travellers cheques, prepaid cards, debit or credit card… there's no shortage of ways to pay for your foreign spending in 2024. But which is the best option?

For most people, there are three aspects to consider when it comes to choosing a method of paying for things abroad:

• Security and safety
• Convenience
• Cost

Thanks to the arrival of new payment methods and specialist travel money services, there are now ways of achieving all three of those goals. However, the best solution is probably a variety of the different payment methods to cover all eventualities.

In this guide, I'll take you through your options, including:

• Cash
• Traveller's cheques
• Debit and credit card payments
• Money transfer services
• Prepaid cards

Cash is convenient, but carrying large amounts makes you a target for thieves, and means you spend your holiday double-checking you've locked your hotel room safe, and nervously guarding your bag when you're out and about.

Thankfully, the days when you'd need to take enough foreign notes and coins in your suitcase to last you a fortnight, are behind us.

Of course, it’s always useful to carry some local currency. How much of it you’ll need will vary depending on where you’re travelling to.

There are some countries where cash is still king. Bulgaria, Romania and Egypt continue to rely heavily on cash, and some parts of Greece and Portugal will also want notes and coins, so it’s worth checking in advance with your travel operator or local guides what they advise about suitable payment methods.

Analysis from 2022, showed that cash payments still accounted for 56% of point-of-sale (POS) payments in Thailand, 46% in the Philippines, 45% in Indonesia and 42% in Vietnam.

And if you're travelling to the U.S, you'll find that tips are usually still paid in cash.

If you’re travelling to the Netherlands, Scandanavia, New Zealand or Hong Kong, expect the opposite to be true. These are countries where digital payments are now the norm. Even things like paying for transport and tipping are largely done by card or phone here.

On cost, one thing to remember is converting cash is rarely the cheapest way to pay for things abroad – the cheapest way is usually a specialist travel credit or debit card.

Tell me where to find the best rates on cash

If you worry that your safety will be compromised by carrying cash, then traveller’s cheques are still an option. American Express and Visa still issue them but as their popularity has waned, you’ll need to plan in advance where to cash them as they’re not accepted as widely as they once were.

Although debit and credit cards can still be stolen, carrying a debit card might make you feel less of a target for opportunistic criminals. Cards can be cancelled if they're stolen so you can limit losses in ways you can't when cash is taken.

The big UK banks – Natwest, Lloyds, Barclays, Halifax and HSBC – all have agreements set up that mean your debit cards can be used abroad. (First Direct, Ulster Bank, Bank of Scotland, and Royal Bank of Scotland are also covered as they are owned by the big banks.)

Using your debit card with these providers, however, is likely to result in you incurring a non-sterling transaction fee.

This where the neo and challenger banks come in to their own, with many offering zero non-sterling transaction fees.

A good specialist debit or credit card is usually the cheapest way to spend money abroad.

So, even if you’ve banked with a big high street bank for decades, it can be worth setting up an account with one of these newer banks just for the holiday money benefits.

Tell me the best rates on bank cards

If you don't want to have to set up a brand new bank account, however, then prepaid cards are another option. You don't need to carry cash and you can get better exchange rates for no fee, than with many traditional banks.

Prepaid currency cards, sometimes called travel money cards, are purchased and pre-loaded before you leave for your trip. It's a bit like taking traveller's cheques, but without the hassle of having to find a bank and get your cheques changed into cash while you're away.

They offer a more secure option to cash, and there are often great exchange rates to be had, which, unlike debit cards can be locked-in on the day you pre-load them. That means you're not held ransom by the local currency exchange rate.

Prepaid cards are usually underwritten by Visa or Mastercard so can be used anywhere Visa or Mastercard are accepted. If you are travelling somewhere that doesn't readily accept debit cards, however, you'll also find you can't readily use your prepaid card.

You can use them to withdraw cash, or use the card in the same way you'd use a debit card, tapping to making a purchase. And you're not limited to what you pre-loaded, either. Most can be topped up via the linked app while you are away.

Tell me the best rates on prepaid cards

It's confusing, isn't it? But exchange rates and foreign exchange fees are two different things.

Ideally, you want to get the best rate for both to keep your costs down.

The exchange rate is the going rate for changing one currency for another. The exchange rate fluctuates and is determined by market factors, namely supply and demand. Although we talk about ‘the exchange rate' there actually isn't one exchange rate. Banks and other currency exchange providers use various different exchange rates to work out how to value different currencies.

The ‘mid-market' rate is often quoted. That's the mid-way point between the rate bankers are prepared to sell and buy currency for, and is sometimes also called the interbank rate. You'll also see the Visa or Mastercard exchange rate used fairly regularly. Although the interbank rate is usually the best rate – as it is the equivalent of a trade rate without any mark-up – it doesn't always work out that way. Without going into huge detail, that's because the interbank rate updates from minute to minute. The Visa and Mastercard rates, however, are set once a day. So sometimes the interbank rate dips below or rises above the Visa/ Mastercard rates for the day. There is not usually a huge difference between these main exchange rates, however. In fact, when I looked at this, it was only when you got above £10,000 that the differences totalled anything close to £100.

So, if the rate you're being quoted seems massively different from the rates being quoted elsewhere, you're right to be suspicious. (Be vigilant in foreign exchange booths in touristy areas!)

The foreign exchange fee is the fee you pay the provider doing the currency conversion for you – whether that's your bank, the post office, a bureau de change counter, or a specialist currency conversion service like Travelex. It's their fee for performing the currency conversion service for you. Some providers charge it, some don't.

Cash

If it's cash you're after, then plan ahead. You have more options than you might be aware of when it comes to ordering your foreign notes and coins, but not if you leave it to the last minute.

And don't use Bureau de Change booths in touristy locations: you're likely to end up paying the highest fees here.

Shockingly, banks will often charge up to 5% on top of the interbank rate for changing your money for you. While using your bank might seem like the simplest option, using a specialist foreign exchange broker can actually be, not just the most cost-effective, but also the easiest solution. Online foreign exchange services can offer free home delivery of your cash, or you can click and collect with providers like the Post Office.

A note of warning about foreign exchange services: If your money transfer company goes bust while holding your money, is is highly unlikely to offer you the same protections as if your everyday bank holding your savings account goes bust. If it is authorised by the FCA (rather than just ‘registered' with the FCA) then it should abide by rules that state your money should be kept separate from the firm's own money. However, there are no guarantees you'll get your money returned to you if it turns out the firm wasn't abiding by those rules.

Debit card

Debit cards are one of the best ways to save on your money expenses BUT look for a specialist travel money card – this is where the real savings are to be had.

If you bank with a high street bank, using your debit card to spend electronically abroad, typically comes with a charge equivalent to 2-3% of the transaction value. The neo-banks – the likes of Revolut, Chase, Monzo and Starling – all offer zero fees to use their cards abroad so, again, shop around and don't assume all banks will charge you roughly the same. There are big differences as these next two tables show:

Compare the above to the charges you'll face if you use a mainstream bank to withdraw cash or pay by debit card abroad:

Prepaid cards

It's possible to get prepaid cards from the Post Office, Sainsbury’s Bank, TUI, and Asda Money. But the prepaid cards I've looked at don't perform as well as the debit cards, so I'm not going to recommend any here. For example, Sainsbury's Bank, is charging a foreign exchange fee of 5.75% plus a 2% reload fee for every time you want to reload your card with money. That just doesn't make financial sense when you can be getting zero fees with a specialist travel money debit card.

If you want to combine safety and convenience, with keeping costs for exchanging currencies low, then the best approach is to mix and match the ways you fund your travel spending.

It's also important to plan ahead – this allows you time to identify the deals that are to be had, and the lowest possible rates, and means you won't be stung with unexpected charges that'll only add to your post-holiday blues and receive your debit or credit card statement.