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Martin Lewis: Going away this summer? Here are the cheapest ways to spend abroad

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"Don't pay to pay abroad," is the key message from MoneySavingExpert.com founder Martin Lewis in the latest episode of ITV's The Martin Lewis Money Show Live, during which he details the best overseas travel cards, his pick of prepaid travel cards and how to get the best rates when exchanging cash.

The video clip and the transcript are below.

ITV's The Martin Lewis Money Show Live – Tuesday 20 June 2023

Embedded YouTube Video

From The Martin Lewis Money Show on Tuesday 20 June, courtesy of ITV. All rights reserved. Watch the full episode on ITVX.

Transcript of what Martin said on the show…

Here's a direct transcript of what Martin said, though we've split it into sections for ease.

'Don't pay to pay when spending abroad'

Audience member: "When spending abroad, how can we best avoid commission fees and get our best exchange rates?"

Martin Lewis: "Well, it's an important question. Don't pay to pay. So that when you're abroad, the last thing you want is extra costs on your spending money. And of course, it is the start of my big briefing. So let's go there, you watch and I'll ask you if it works when you finish. Play this thing.

Specialist overseas cards have near-perfect exchange rates

"Okay. Now, I'm a big fan of specialist overseas travel cards. Here's what normally happens when you spend on plastic abroad. You spend, the bank or the card provider gets a near-perfect rate, and then they add a 3% non-sterling exchange rate fee. That means you get £100 worth of euros or dollars or dong, which is the Vietnamese currency before anyone thinks anything more. But it costs you £103 because of the extra 3%.

"But specialist cards don't add that 3%. So you get the same near-perfect rates that they do. And there are three vying for best-buy at the moment. You've got the Chase debit card. So it's just you don't have to switch bank to get it.

"You've got the Halifax Clarity credit card and the Barclaycard rewards credit card, of course, because they're credit cards, it's only worth doing if you pay the card off in full. So those are the three vying. All have near-perfect exchange rates, all are interest-free on spending - with the credit cards, you got to pay it off in full, of course.

"Chase is easiest to get because it doesn't do a full credit check. It just does an ID check, the other two do a full credit check. Not a problem for most people, but some may be rejected from it. All give you fee-free ATM withdrawals, although these are up to £500 a day. Chase is up to £500 a day, but also caps it at £1,500 a month.

"So if you really like getting cash out - it's not really a good thing for most; you’re better normally to spend on the card - you'd be best off in Barclaycard because Halifax charges you interest, even if you repay it in full, of roughly £2 per £100. Barclaycard doesn't, Chase doesn't either, but the limits are smaller, so that's fine for those who don't get too much cash out."

So what it all boils down to is which card gives you the best perks

"So then what it all really boils down to is who gives you the best perks on top of the near perfect rates. Well, with Chase, you get 1% cashback on up to £15 a month on UK and world spending, most of it, for at least a year. So that's pretty good. It could be £180 a year if you're spending on it.

"Halifax gives you a one-off £20, so you get the card, you spend a penny on it - I mean, I don't mean spend a penny on it - I mean you put, you buy a banana. I've shouldn’t have done banana either, should I? You buy something on the card and you'll get your £20 on that and then Barclaycard gives you less cashback - 0.25% - but still does give you cashback in the UK and overseas.

"The credit cards do have the advantage of Section 75 protection, which is added consumer protection. So if you tend to go abroad and buy something valuable that costs over a £100, the credit card gives you more protection than Chase. But the honest truth is they're all pretty close and pretty good and so much better than what you normally spend on.

"I should note there are others like Santander Zero, Monzo, Starling and some Virgin Money cards which don't quite have the cashback but are pretty close. If I had one of those, I probably wouldn't bother getting a new card. I'd stick with it. [Talking to audience member] Do you have any of those cards?"

Audience member: "I have a Monzo card that I had quite a while ago, but I have recently had a Chase."

Martin: "Well there you go. Very short answer to your question, use your Chase card, wish I hadn't bothered now."

The rates on overseas cards 'smash the pants' off all bureau de change

Martin's co-host Angelica Bell: "Well Martin, on card usage, I would love to bring in Pauline who's also here with us tonight. She's got a question for you."

Audience member Pauline: "Hello. Hi. If I only go on holiday once, maybe twice a year, is it worth taking a card or buying actual cash?"

Martin: "I mean, the rates of these cards smash the pants off all bureau de change.

"Now, if you're only going away once in a year, obviously, if you're not spending that much, even though they smashed the pants, it's not going to be a big saving. But for example, Chase is really easy to get and you get 1% cashback in the UK as well.

"It also has a pretty decent interest rate on savings. You don't have to switch to it and there's no credit check. Why not? Because then you've got it. And whenever you go abroad, you just use that or get one of the others. So personally, I don't have foreign cash anymore. I don't bother with it anymore. I have one of these cards.

"I never even think when I go abroad, what am I going to use? I just get my card out on the holidays overseas wallet and I know I'm going to get near perfect rates. Going away twice in a year, why not would be my answer."

With prepaid cards, you can opt to get the rate on the day you top-up

"So I just wanted to put in prepaid cards of two, which is slightly different to the credit and debit cards.

"With the credit and debit cards, you get the rate on the day that you spend. So whatever the exchange rate is on that day.

"With the prepaid cards, you can opt to get that rate on the day that you top up. So if you thought the euro rate was going to drop, I mean, you're doing currency speculation, but some people like to do it. You could lock in today's rate. And if you were worried it was going to get worse, you might do 50% on this and 50% on one of the near-perfect cards on your day to sort of spread the risk.

"Now, my top pick there, that would be Revolut that has no exchange rate fee, no loading midweek, it does at the weekend, so you want to do it there on this one. You can actually choose to get the rate on the day you spend as well or the day that you top up. So it gives you a good option."

There are also now prepaid cards for kids

"One of the things people have said to me in the past when I've talked about the cards is how do I get the kids pocket money when we're abroad if I'm not using cash?

"Well, you could take some at the ATM or now there are prepaid cards for under 18s. Now, most of these are my normal top picks. If you want to give kids the cards, you know, they've got spending limits that you can set for how much they can spend and you can monitor what they're spending on an app. But they also, many of them, give you the near-perfect exchange rates.

"So you've got Hyperjar, which is totally free. It just you can't take money out of cash machines. You just have to use it for spending in the UK and abroad. If you are a customer, you can get your kids a Revolut card for free, but there's a £5 delivery. Or if you're a NatWest customer and NatWest Rooster, but you can only put £50 and a near-perfect exchange rate on that if you're spending abroad.

"Also have great rates; GoHenry and Starling Kite, but you have to pay for those cards, but if you're paying and you've already got one, they give you good rates too. And if you wanted a bank account for the kids, that would give them a good rate when they spend abroad - so it doesn't have all the monitoring services, but it's a normal bank account - Nationwide FlexOne debit card for 11- to 17-year-olds."

Comparison sites show you the best rate when exchanging your cash

Angelica: "Martin, I want to talk more about cash, because some people actually like to have it in their hands, they feel more secure. And we've had lots of questions."

Martin: "And I'm not averse, you know if you want to take £100 worth of foreign currency with you in case you want a taxi and you’re worried they won’t take a card, it can be worth doing."

Angelica: "Well, here's this question from Vicky regarding cash abroad. Should we take sterling and change it abroad or change the sterling into euros before we go?"

Martin: "So what I would normally favour is change the sterling into euros. I would do it via a comparison site that shows you the best rate. The way to compare cash rates is forget commission free, forget all of that.

"You simply say, I've got £500. How many zlotys [Polish currency] will you give me after all charges? And whichever gives you the most is your winner. And that's where the comparison site does (if you're going to Poland, obviously). The reason I wouldn't wait until you go is because you don't know what rate you'll get.

"Now, if it's somewhere you regularly go and you know there’s a brilliant bureau de change there, well then you could wait. But generally, most places you go will only have two or three agencies where you do a comparison, here you're looking at 20 or 30 different places. So you're likely, just because you can do better research, to get a better rate here as long as you going to do a comparison." 

Beware the debit cards from hell

Angelica: "Okay, let's move on."

Martin: "Right what have I got next? I think I've forgotten. Oh, yes. My outside Europe debit cards from hell. Okay. So look, there are certain debit cards, which as well as a 3% exchange rate fee, charge you when you spend on them outside of Europe, which technically is the EEA [European Economic Area]. Yeah. So it's the EU plus Liechtenstein, Norway and Iceland.

"They are the Bank of Scotland, Halifax and Lloyds - their standard cards, which charge you 50p each time - and TSB, a £1. So imagine you're buying something for a fiver. The exchange rate fee means you've got to pay £5.15 for it and then you've got that [fee]. That makes it £6.15.

"You just be better to put it on a bog standard credit card paid off in full than using the debit cards. But people tend to think debit is better than credit. Well, not in this case when you're spending abroad. If you've got one of those cards, beware; if you're going outside Europe, you will pay a little bit more for using it. So you probably, definitely want a specialist card in that case."

For more information and help, see our travel money tools and guides: 

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