Using the wrong travel money can quietly cost you 3–5% on every transaction, and over a two-week holiday that adds up faster than most people expect. The difference between a well-chosen travel card and a regular bank card is not a rounding error — it can easily run to £50–80 on a £1,000 spend, which is a big chunk of a holiday budget you could be spending on a better hotel or a nicer meal. This guide breaks down the real cost of spending abroad and the best ways to pay for it, from travel credit cards to pre-paid cards and plain cash.
The hidden cost of travel money
Most people have little idea how much they lose to exchange rates and fees, because the cost is buried in the transaction rather than charged upfront. To put it in concrete terms: on £1,000 spent abroad, a regular UK debit card with its non-sterling fee typically costs you £30–50, while a bureau de change at the airport can eat £50–80. At the other end of the range, a travel credit card with no foreign transaction fee costs roughly £0–5, a specialist travel debit card about £0–5, and a pre-paid travel card around £5–15. The lesson is blunt: the worst option costs you roughly £50–80 more than the best on the same trip, simply because of how you chose to pay.
Travel credit cards: best for spending
A good travel credit card charges no foreign transaction fees and gives you a competitive exchange rate, and some even add cashback or points on foreign spending. In the UK the usual suspects all sit at 0% with no annual fee. The Starling Bank credit card uses the Mastercard rate with 0% on purchases for six months, the Barclaycard Rewards card runs on the Visa rate with 0.25% cashback on overseas spending, the Halifax Clarity is a simple no-fee Mastercard card, and Virgin Money lets you rack up Virgin Points on spending. All four charge nothing for foreign transactions, which is the single feature that matters most.
Beyond the UK, the same logic holds. In the US, cards like the Chase Sapphire Preferred and Capital One Venture charge 0% foreign transaction fees but carry a $95 annual fee, while the Capital One VentureOne, Discover it, and Bank of America Travel Rewards offer 0% with no annual fee. In Canada, the Scotiabank Passport Visa Infinite charges 0% but at a $150 annual fee, while Brim Financial and the Home Trust Preferred Visa are both 0% and free. If you hold cards in more than one country, use a no-fee option in whichever currency you are spending.
Travel debit cards: best for ATMs
Travel debit cards are the essential companion for getting cash abroad without the fees, and for acting as a backup way to pay. In the UK, the free-withdrawals benchmark cards are Starling (free, up to £300 a day), Monzo (free up to £200 a month), Revolut (free up to £200 a month at the interbank rate), Nationwide FlexDirect (free up to £200 a month), and Chase UK (free up to £500 a month), all with 0% foreign transaction fees within their limits.
In the US, the standout is Charles Schwab, which reimburses ATM fees with no limit and charges 0% on the Visa rate — Fidelity Cash Management and Betterment offer similar unlimited-reimbursement deals. Wise is popular in both the US and Canada, with free withdrawals up to a monthly limit and interbank-rate conversion. In Canada, KOHO offers free withdrawals up to $200 a month, while the Scotiabank Passport Visa Infinite charges $5 per withdrawal plus 2.5% on the debit side — a reminder that the debit version of a good credit card is not automatically a good deal. As a general rule, if your regular bank card charges foreign transaction fees or ATM fees abroad, a specialist travel debit card pays for itself within a few withdrawals.
Pre-paid cards: good for budgeting
Pre-paid cards let you load a fixed amount of currency before you travel, which locks in your exchange rate and, importantly, means you cannot spend more than you have loaded. Revolut is 0% on loading up to a limit with free ATM withdrawals within limits, while Travelex is 0% to load with a £1.50 ATM fee, and the Post Office Travel card is 0% to load with a £2 ATM fee on the Mastercard rate. This budget control is the real appeal — if you want a hard ceiling on holiday spending, a pre-paid card is the simplest way to enforce it — and it is also a handy backup if your main card is lost or stolen.
But pre-paid cards have genuine downsides. Some charge load fees, the exchange rates can be less competitive than on a proper travel card, and they are not accepted everywhere — some car rental agencies and hotels refuse them. Loading can take one to three business days, so they do not suit last-minute trips, and a few charge inactivity fees if you leave them unused. For most people they work best as a disciplined spending tool or a backup, rather than the primary way to pay.
Cash exchange: when you actually need it
Cash is still necessary for small vendors, tipping, and countries where card acceptance is limited, so the question is not whether to carry some but how to get it at the best rate. The best approach is to order currency online for home delivery — this gives the best rates if you plan ahead. The Post Office in the UK offers 0% commission with same-day collection, the US option is AAA with good rates and no fee for members, and in Canada you can order online from your bank and pick it up in branch. ATM withdrawal abroad is convenient for small amounts, though the cost varies with your card.
The worst ways to get cash are the ones that make their money on a markup: the bureau de change at the airport (a 5–10% hit), hotel exchange desks (another 5–10% convenience premium), exchange kiosks in tourist areas (3–8%), and currency exchange shops generally (3–5% hidden in the rate). Every one of these is a tax on convenience, and the airport version is the worst offender of all.
How exchange rates really work
To spot a good deal it helps to understand the three rates you will meet. The interbank rate — also called the mid-market rate — is the “real” rate banks use to trade with each other and serves as the benchmark. The retail rate is what you get when you exchange money and is always worse than the interbank rate. And the card network rate is what Visa, Mastercard, and Amex each set, usually sitting very close to the interbank rate. When you compare offers, anything that uses the interbank or mid-market rate is best, and cards that run on the Visa or Mastercard rate are usually competitive. Avoid anything that adds a markup to the rate, and compare what you are offered against the live interbank rate — xe.com shows this in real time.
Always pay in local currency
One habit beats every other tip on this list: when a foreign terminal offers to charge you in your home currency, always choose the local currency instead. This practice, known as Dynamic Currency Conversion or DCC, is a trap. Imagine you buy dinner in Spain for 50 euros. Pay in euros and you get your card’s rate, close to interbank, costing about £42. Choose to be charged in pounds and the terminal applies its own markup of 3–5%, costing about £44 — a £2 loss on a single meal, which over a week adds up to £20–40 given away. The terminal operator offers DCC for one reason: they profit from the markup every time you accept it. So when the machine asks, decline the home-currency charge every single time.
Practical habits for abroad spending
A few straightforward habits keep your costs near zero. Before you travel, get a travel credit card with no foreign transaction fees, get a travel debit card for ATM withdrawals, notify your bank that you are travelling so they do not block your card, check your daily withdrawal limit and raise it if needed, and save your bank’s emergency number in your phone. It is worth carrying a small amount of local cash for immediate expenses and a pre-paid card as a backup.
While you are abroad, always pay in local currency, use ATMs from major banks rather than independent machines in tourist areas, and withdraw larger amounts less frequently to cut down on per-transaction fees. Keep your receipts and check your statements when you return, keep a backup card separate from your main wallet, and use contactless where possible. The most common mistakes — exchanging cash at the airport, using a regular debit card, accepting DCC, withdrawing cash on a credit card, or carrying no backup at all — are all avoidable with a little planning, and each one costs you money you would rather keep.
Bottom line
The cheapest way to spend abroad is a simple combination: a travel credit card with no foreign transaction fees for most purchases, a travel debit card with free or low-fee ATM withdrawals for getting cash, and a small amount of local currency bought in advance at the best rate. Avoid airport exchanges, regular debit cards, and Dynamic Currency Conversion at every opportunity, and the savings on a typical two-week holiday are real — often £50–100 or more. The cards themselves are largely free, the rates are close to the mid-market level, and the only skill involved is choosing the right card before you fly and paying in local currency once you land.