Coronavirus Universal Credit & Benefits
14 May 2021
The pound is fluctuating against the euro amid coronavirus uncertainty, and with some overseas travel back on, you might want to know if you should buy currency now or wait. Either way, it's crucial to bag the top rates. Spend the wrong way abroad and you could be wasting ££s every time you shop. It's not just having the right card – it's also about knowing the tricks to help you get the most bang for your buck.
Martin recorded the video below in 2017, and while the info about Article 50 is no longer relevant, the rest still applies today.
Without a crystal ball, no one knows if the pound will be stronger or weaker in the future. Anyone who tells you otherwise is merely speculating.
If you're concerned about currency volatility before you head away, you could choose to buy half now and half later. Do this and you'll be less affected by currency swings.
Whether you buy now or later, the key is to get the best possible rate at the time. For more on the options Martin talks about in the video, see specialist credit cards, prepaid cards and travel cash below.
Ultimately, when abroad you want to pay for only what you buy, yet by doing it the wrong way many also pay for paying, too. Here's how much spending €1,000 actually cost, in pounds, when we made comparisons on 30 July 2019 using our Travel Money Comparison tool (we assumed five €100 cash withdrawals, and 20 transactions on the cards).
Note that most airport bureaux are currently closed due to the coronavirus crisis so we've left the figures above from July 2019 to show the usual differences, which can be massive. The winner is clear – apply for a specialist overseas credit card, then use it every time you go.
Specialist travel credit cards don't add sterling exchange fees, so they give near-perfect rates on spending abroad. Do note you'll usually be charged interest on cash withdrawals even if you pay off in full, although our top pick below is an exception to this rule – if you'll need to withdraw cash regularly, also consider a specialist debit card.
Full info and more options in our Top Travel Credit Cards guide.
Important. Ensure you always repay IN FULL, preferably by direct debit, or the interest cost dwarfs any gain you get from the better rate.
On top of giving you the top rates when spending abroad, specialist overseas credit cards also give you Section 75 protection.
Pay for something costing more than £100 and less than £30,000 on a credit card and the card firm's jointly liable with the retailer if things go wrong. This is useful abroad, as taking things back is tough. It's also good protection when buying from overseas websites. For more, read our Section 75 guide.
Credit cards are good if...
Credit cards are bad if...
It's possible to get a debit card that doesn't charge any fees on non-sterling transactions. You'll need to open a bank account, though you don't have to switch (and it may not be worth switching anyway as you'd be missing out on other bank account perks – see Best Bank Accounts).
There is of course nothing stopping you from having a second (or third) bank account, so you can open one separately for travel and use it alongside your existing account.
Check our main Travel Cards guide for more options.
Specialist debit cards are good if...
Specialist debit cards are bad if...
Our TravelMoneyMax travel money comparison tool compares rates at about 30 online bureaux and orders them by how much currency you'll actually get after all fees and charges.
Though beware, pay a UK bureau by credit (not debit) card and it counts as a cash withdrawal, so there's a fee and interest even if you fully repay – best to always use a debit card or cash to buy.
Getting cash is good if...
Getting cash is bad if...
Here, you load with cash before you travel, then use it like a debit card. If you lose it, your cash is protected. You can choose to get the rate on the day you load/buy, not when you spend, so currency fluctuations may mean you get a worse deal (or better one).
However, there are a few places that don't accept them – car hire firms and pay-at-pump petrol stations are the major ones, but there are a few others to watch out for.
Our current top-pick Revolut gives perfect interbank rates on euros and dollars on weekdays, though it has a small markup at weekends.
For more info and other top picks, see Cheap Prepaid Travel Cards.
Prepaid cards are good if...
Prepaid cards are bad if...
Let's make this plain: do not use the following cards for spending, particularly outside Europe. Following European regulations last year, they're not quite as diabolical as they once were – but any of the other methods in this guide still beat them handily.
These debit cards are our cards FROM HELL. Not only do they add a load and an ATM fee, they also charge up to £1.50 EVERY time you spend on them. So, say you spend £5 on the card. After loading and spending fees, it can cost £6.65, which soon adds up over a holiday.
Thankfully, regulations mean spending fees now CAN'T be charged for purchases made in euros in the EU, Iceland, Liechtenstein and Norway (the European Economic Area). But the cards below continue to charge 50p-£1.50 for transactions in other countries and currencies – meaning it's still best to avoid them.
DO YOU HAVE A DEBIT CARD FROM HELL?
Bank of Scotland | Halifax | Lloyds | IF | Clydesdale/Yorkshire (hell for small spends)
When paying on a card abroad (or withdrawing from an ATM), you're often asked if you want the transaction to be in pounds or the local currency.
As a general rule, never pay in pounds – that means the overseas store/bank is doing the conversion, and rates are awful. For a full explanation of how this 'dynamic' currency conversion works, see Martin's 'Using plastic overseas? Always pay in euros?' blog.
A few years ago, banks and credit card providers didn't have to show a statement breakdown of what they were charging you when you used your card abroad. This all changed a few years ago, causing some confusion, with some people thinking they were only now starting to pay, though it's actually always been the case on all but a few cards.
So find out how much the cards you already have charge for use abroad – as you may not have the time to switch before your holiday – and make sure you use the cheapest (the best card is listed in point 2). To help, we've built a How good is your current plastic? checker.
Note: Many airport bureaux are currently closed due to the coronavirus crisis, so you may not be able to change your cash at the airport – even more reason to plan ahead and sort your travel money before you go.
Using an airport bureau is the easy option, but it's such a waste. Airport and ferry port rates are usually dismal, as they know they're the last port of call and you're a captive customer.
Far better that you use TravelMoneyMax before you go or, if you've left it too late, at least order in advance online to pick up at the airport to get better rates.
In general you don't get a better rate changing your pounds to euros, dollars, lira or dong once you're in that country than you do here. Yet that doesn't mean there aren't a few local bureaux overseas that may give tip-top rates.
The problem is there's no way of knowing until you're there, and as rates vary every day, once you're there, comparing to what was available back home is tough.
Therefore we suggest for safety you sort it before you go (if you can – some currencies, like the Lao kip, aren't available outside the country). The big advantage of that is you can use the TravelMoneyMax travel cash comparison to find the best rate from around 30 bureaux.
And getting a top rate here should usually beat relying on an unknown rate from a one-off local bureau once you're there.
If you're buying currency at a bureau de change, or online through TravelMoneyMax, there's a hidden charge you could fall foul of if using a credit card.
Buying currency is counted as a cash withdrawal, so you could face a myriad fees, including cash withdrawal fees, interest, or even a fee for using a credit card charged by the money changer.
Some card providers, including Santander, Tesco Bank and Virgin Money, also treat loading a prepaid card using a credit card as a cash withdrawal.
So if you're buying currency or loading a prepaid card, ALWAYS use a debit card, which isn't allowed to charge this fee, or withdraw cash and pay with that instead.
However, it may be cheaper to travel cashless and simply withdraw money from an ATM at your destination airport with a top travel credit card. Do this and you'll benefit from near-perfect exchange rates (which'll beat the rates offered on exchanging cash in advance).
However, bear in mind that it may be difficult to avoid ATM fees in certain countries. From our experiences at MSE Towers, we've seen ATM fees in Vietnam, Thailand, India, the US and elsewhere – though going cashless may still work out cheaper than taking cash even after factoring in the odd ATM fee.
Remember that if using a credit card overseas, almost all card providers will charge interest from the moment you make a cash withdrawal. To minimise this, pay off the balance IN FULL while abroad. Also see the point below in regards to the potential credit score impact of withdrawing cash on a credit card.
It's also worth being aware that not all airports will have an ATM at arrivals. Others will have them but may charge fees or worse, not be in working order. If you do plan on travelling cashless, it may be worth researching the airport online before you go.
Withdrawing cash on some of the top specialist overseas credit cards is a MoneySaving thing to do. But, it can have unintended consequences.
If you withdraw cash on a credit card, it's recorded on your credit report. This isn't necessarily bad, in itself, but if you applied for a loan or other credit card soon after, the new lender might see it as a sign that you've no cash in your current account and you're so desperate for cash, you're willing to pay high interest to get it.
In isolation, the negative effect of withdrawing cash is minor and shouldn't be the root cause of a rejection. But if it's combined with other negatives on your credit report, it doesn't look good.
To be safe, if you've an important credit application, like a mortgage, to make – it's probably worth avoiding withdrawing cash on your credit card for the few months before the application.
You can read our short guide for more information about withdrawing cash on a credit card and its effect on your credit report.
Are you part of the 'overseas wallet or purse' club? Martin's pioneered this, and it's a clever way to make sure you're prepared on holiday. His rationale is that there are some things you only need when abroad:
You need to be savvy with more than just travel cash. Fail to be clever about your money elsewhere and you could wipe out all the gains you've made from paying the right way.
So, whether you're chilling in Chile or roaming in Rome, there are loads of hidden tricks to save cash and ensure you're Havana great holiday.
We've a guide to help you find the cheapest flights, get free maps on your phone, find the best plane seats and more. Read the 60+ Overseas Travel Tips to make yours a happy holiday.
Many car hire firms won't accept a debit or prepaid card when you come to pick up your car, and will instead need a credit card. As you'll usually be paying (or leaving the deposit) in the foreign currency, and this can be a substantial amount of money, a specialist overseas card is particularly good for this.
Travel insurance is as important to your trip as getting currency, yet many go abroad without it.
A decent travel insurance policy will pay medical bills for you if you have an accident or fall ill – most countries charge for medical care, and some charge a lot. It will also cover you for cancellation, lost or stolen baggage, and for legal expenses should you get into trouble overseas.
It's a travel essential – and with prices starting from £18 for an annual policy for an individual in Europe – don't leave home without it. Check out the top policies in our Cheap Travel Insurance guide.
Clever ways to calculate your finances