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Travel money tips for better trips

How to make the most of your holiday spending money

As most of us can only afford to get away once a year, it's important to get the most out of our hard-earned holiday spending money.

Here, we explain the pros and cons of the different methods of spending abroad and why it's best to use a mix of payment methods.

Top travel money tips

  • Buy your currency before you go – this gives you time to compare rates and fees to get the best deal for you.
  • Take more than one payment type – it's useful to have local currency for small purchases as well as an alternative method of payment for bigger transactions.
  • Use the right card. We give you the lowdown on which cards to use and when.
  • Make sure your holiday money is adequately insured. Not all travel insurance policies cover lost or stolen cash and those that do will usually only cover a certain amount.

1. Foreign currency

It's a good idea to take some cash, in the local currency, even if you only intend to use it to pay for smaller items such as refreshments and public transport.

With cash, you have certainty about how much spending money you have – which is great if you're on a budget. Its main disadvantage is that it's not as safe as other methods of payment.

Even if your accommodation has a safe in which to store cash, you will need to carry some with you to fund each day's purchases.

Not all travel insurance policies cover stolen cash. Among those that do, you will usually only be covered up to a certain amount – usually between £200 and £500 per person. Anything over this and you risk losing your money if it's stolen or lost.

Generally, you won't get a better deal on your foreign currency if you wait until you arrive at your destination. It's wisest to buy your currency before you go if you're able to (some currencies, away from mainstream tourist destinations, are only available in that country).

It's worth shopping around not just for the best exchange rate, but for the lowest fees too: if you need your currency to be delivered to you, there may be a charge (usually around £5).

Foreign currency is also sold at airport and ferry terminals but they tend to offer less competitive rates, so it's wise to avoid them – or at least order ahead online to collect there

Our foreign currency tip

If paying a UK exchange bureau, to get the best deal pay by cash or debit card. Paying with a credit card is classed as a cash withdrawal on the card, meaning there may be a fee and interest to pay – even if you fully repay the balance every month.

Pros

  • Convenient
  • Easy to pay for smaller items
  • Help you stick to a budget

Cons

  • Offer no security against theft

Interested in buying foreign currency?

Find out about Virgin Money Travel Money


2. Prepaid cards

If you're worried about over spending, a pre-paid travel card is a good option for larger purchases.

A prepaid card enables you to load a card with cash before you travel – as you do with a gift card or phone card – then use it like a debit card. You can buy a travel prepaid card in major currencies, such as dollars or euros.

There are many potential advantages to spending with a prepaid card.

As with foreign currency, you are locked into the rate when you buy. This gives you certainty about how much you have available to spend and can make it easier to budget.

Some providers supply two cards – so you can keep one in a safe place and use in case the other is stolen. Others will cancel your card if it's lost or stolen and send you a replacement – meaning prepaid cards are safer than carrying cash.

They are also more convenient than travellers' cheques – as they are ready to spend without needing to be exchanged into cash.

However, as with all methods of payment, there are some potential disadvantages to be aware of.

Not all places accept them. Car hire firms and pay-at-pump petrol stations are the most common examples.

It's also wise to make sure you understand and compare charges before you buy. Some cards levy an application fee of up to £9.99. You may also have to pay top-up charges or a fee for a replacement card.

You can buy a travel prepaid card in major currencies

Pros

  • Help you stick to a budget
  • Convenient
  • Can be re-issued if lost or stolen

Cons

  • Not accepted everywhere
  • May incur additional fees

Interested in buying a prepaid card?

Find out about the Virgin Money Prepaid Travel Mastercard


3. Credit cards

These are the most widely accepted cards around the world, so can be a convenient way to manage your spending money.

There are other advantages to spending with a credit card, too.

They offer you the same level of protection abroad as when you use them in the UK. So if your card is stolen, you should be covered for any money that's spent on it.

They also give you Section 75 protection – even overseas.

This means that if you use your card to buy goods or services which are not fully supplied or are unsatisfactory, and the cost of an individual item is more than £100 but not more than £30,000, you may have a claim against the retailer and the card firm.

More information on Section 75 is available on the Government's Legislation website  Link opens in a new window

Another advantage of credit cards is that they generally offer competitive exchange rates, thanks to a wholesale rate determined by card providers Visa and Mastercard.

However, there are some potential disadvantages associated with spending overseas on your credit card.

You could have to pay a non-sterling transaction fee, both on purchases and cash withdrawals. Usually this is around 2.75%.

If you use your credit card to withdraw cash, you may also have to pay a withdrawal fee. This is usually around 2-3%.

You will also be charged interest on cash withdrawals from the day of the withdrawal. This is the case even if your card offers 0% interest on purchases and you pay the balance in full at the end of the month, as the interest-free period does not apply to cash withdrawals.

Finally, as with spending in the UK, unless your card offers 0% interest on purchases, if you don't pay off your card in full at the end of the month you'll pay interest on your holiday purchases.

Our credit card tips

As in the UK, some retailers may have a minimum card payment amount, so it may also be a good idea to take some cash in the local currency for smaller purchases such as public transport and refreshments.

Ask for all overseas transactions to be made in the local currency rather than sterling. While a sterling transaction shows you the exact cost of your purchase, your bank is likely to give you a better exchange rate than the retailer – meaning you'll save money by paying in the local currency.

Remember to tell your credit card provider if you're planning a trip abroad. Otherwise, they may think your card is being used fraudulently and block it. It's a good idea to take a copy of your credit card company's 24-hour number with you so you can get in touch if something goes wrong. You may also want to give them a contact number for you, in case they need to contact you while you're away.

Pros

  • Widely accepted
  • May offer competitive rates
  • Offer protection against theft
  • Offer Section 75 protection if there are issues with the items you purchase

Cons

  • Can make budgeting more difficult
  • Some retailers may require a minimum payment
  • Likely to incur withdrawal fees at ATMs
  • May incur additional fees and charges
  • Interest will be charged on cash withdrawals from the date of withdrawal

Interested in credit cards?

To say thank you for being a Virgin Money customer, we will give you £25 cashback when you take out any Virgin Money Credit Card. Terms apply. Representative 20.9% APR (variable).

See what we offer


4. Debit cards

Like credit cards, these are convenient and safe. Their main advantages are that they are widely accepted and offer you the same level of protection against fraud as credit cards, meaning you should be covered if your card is stolen.

There are a few down sides to debit card spending abroad, though.

Like many credit cards, debit cards sometimes incur a transaction fee for non-sterling spending.

A few may also add a spending fee of between £1 and £1.50 with every overseas purchase – no matter what the value. With small purchases this can add a considerable percentage to your spending.

Unlike credit cards, they provide no Section 75 protection if things go wrong.

Finally, you will pay a withdrawal fee if you use an ATM – as with credit cards. This is usually around 2% of the amount you withdraw.

On the plus side, however, in contrast to credit cards, debit cards don't incur interest charges on cash withdrawals.

Debit cards are convenient and safe.

Pros

  • Widely accepted
  • Offer protection against loss or theft

Cons

  • Exchange rates can be less competitive
  • Likely to incur withdrawals fees at ATMs
  • Some retailers may require a minimum payment
  • May incur additional fees and charges

5. Travellers' cheques

Travellers' cheques are pre-printed cheques for fixed amounts, in major currencies such as sterling, euros and US dollars. You can use them to pay for things or exchange them for cash while you're away.

Once one of the most popular ways to obtain foreign spending money, they have declined in popularity over recent years as card usage has become more widespread. But they still offer particular advantages.

Like cash, you can only spend up to their value, so they are a great way to stick to a holiday budget.

Unlike cash, which isn't always covered on travel insurance, if you lose them or they're stolen, you can often get them replaced within 24 hours.

On the downside, they're not as convenient as other methods of payment. Once abroad, you need to find a place to change them and produce ID, such as your passport, to prove you're the person who bought them.

In addition, typically you have to pay a purchase fee when you buy the cheques and commission when you use them. The Money Advice Service reports that generally, they cost more than using cash or cards.

Travellers' cheques are available from the Post Office, bureaux de change, some travel agents and banks and specialist online providers.

Our travellers' cheque tips

For maximum security, keep your receipt and write down the serial number on each cheque and keep it in a different place, together with the contact details for the company you bought them from.

Sign them straight away when you buy them, but only countersign them (sign them for a second time) when you need to use them.

Pros

  • Help you keep to a strict budget
  • Offer protection against loss or theft

Cons

  • Less convenient than cards or cash
  • May offer less competitive rates

6. Don't forget travel insurance

Travel insurance is as important to your trip as travel money, yet many people go abroad without it.

A good travel insurance policy will pay medical bills for you if you have an accident or fall ill – most countries charge for medical care. It will also cover you for cancellation, lost or stolen baggage, and for legal expenses.

Interested in travel insurance?

To say thank you for being a Virgin Money customer, we will give you £25 cashback within 90 days when you directly purchase Virgin Money Annual Multi-Trip Travel Insurance, providing the policy hasn't been cancelled. Terms apply.

See what we offer

 

Links to external websites are for information only. Virgin Money receives no income from them and accepts no responsibility for the website content. The information in this article is correct as at 09 April 2018.