The best and worst ways to get foreign cash

by Neil Faulkner on 13 July 2010  |  26 comments
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We compare and rank the seven ways that you can get cash or spend abroad. It's the most comprehensive analysis yet!

The Telegraph recently reported a travel money rip-off, saying we pay £16 extra at airport exchange bureaux based on the average £286 foreign-exchange transaction compared with Post Office prices.

However, the savings available are even greater, because Post Offices don't offer top foreign exchange prices.

From dearest to cheapest, here are the ways to get foreign cash or pay for things abroad. In order to rank these correctly I've taken into account the exchange rate plus commission and other costs, if any. (Commission or postage free doesn't mean cheapest, because you could get a terrible exchange rate.)

7. Foreign exchange at airports

Costly airport foreign money hits the news frequently, yet people still buy there. We're not kidding when we say it's expensive. You're throwing away £20+ for every £300 you exchange. If you lost a £20 note you'd be peeved all day.

6. Foreign exchange from banks, Marks &  Spencer, and the Post Office

Banks are expensive for foreign exchange. M&S and the Post Office fit roughly in this price bracket, although they're sometimes a bit cheaper.

5. Foreign exchange from the internet

Travelex Online offers much better rates than its airport bureaux, or banks. Conveniently you can order the currency online and pick it up at the airport.

However, several other internet providers are normally cheaper, particularly if you make bigger orders for free delivery. Try Interchange FX, Thomas Exchange Global and Online FX.

In my opinion, Travelex Online's price guarantee is a small print-filled faff.

4. High-street bureaux

Online bureaux, such as all those mentioned above, tend to have high-street bureaux too, with the same or better deals. When checking online prices, get the number of the nearest branch and call up to see its rates.

In any case, you can save on delivery for smaller orders if you order online and collect the cash in person.

3. Exchange bureaux overseas

This method I know least about, as I'm relying here largely on reports from readers over the years. Many readers have written in saying they find high-street bureaux in foreign countries are cheaper than buying in the UK. If they're right, this is number three.

2. Cards for cash withdrawals

Most credit, debit and pre-paid cards are expensive overseas. However, the best of the bunch are the cheapest way to get foreign currency.

The best cards for cash withdrawals are:

The only credit cards I recommend for cash withdrawals from overseas ATMs are the Halifax Clarity and Santander Zero credit cards. Both have unbeatable exchange rates and no charges.

There are catches. You could fall for an expensive trick known as ‘negative order of payment’. You're also charged interest from day one when you withdraw money: you don't get 50-days or so interest free, and the interest rates can be 26% APR. A £1,000 withdrawal might cost an extra £4 or so for every week the debt is unpaid.

Halifax's card beats Santander's because it's typical cash withdrawal interest rate is lower at 13% APR, but pay it off quickly.

All the research for this article is my own except for pre-paid cards, which were looked into by Rachel Robson recently in The best cards for shopping abroad right here at lovemoney.com.

Looking at the more flexible pre-paid cards in Rachel's article – the ones you can use in any country – and running tests based on today's exchange rates, the only card that's better than internet exchange bureaux is the Escape Travel Money sterling MasterCard pre-paid card – provided you avoid the small print booby-traps. I find pre-paid card T&Cs and charges fiddly. I don't like them.

That's also presuming Escape uses MasterCard's own exchange rate.

Nationwide's debit card continues to be excellent for withdrawals. In the EEA, Turkey and Israel it is unbeatable for foreign money. Outside this area it's a little more expensive, but still better than high-street bureaux.

It may surprise you that the above list disregards Nationwide's credit card. This is because the overseas withdrawal charges now add up to 2.5% to 3.5%.

When using overseas cashpoints and you're asked if you want to be charged in pounds or the local currency, choose the local currency. It should be cheaper. Also, some ATMs charge extra, but they should tell you beforehand.

1. Cards for overseas purchases

A small number of debit and credit cards when used for purchases overseas give you the cheapest way to go about this whole foreign money business.

Most cards are expensive, but this is where six cards shine. Here they are, and I'll rank them for overseas purchases:

The first five on the list charge nothing whatsoever for making purchases abroad, so long as you clear your entire credit-card bill next month.

There may be a difference between SAGA and the other at the top due to it being VISA and the others MasterCard. The difference, if any, should be caused by a technicality, and very small.

Don't assume a credit card uses MasterCard's or VISA's exchange rates. Card providers can theoretically charge their own rates. I've checked the above credit cards, and they don't. 

The Escape pre-paid card may or may not use MasterCard's rates and I've been unable to confirm this. If it doesn't use MasterCard's rates, it probably shouldn't be in the top ways to pay abroad.

Nationwide is last, because, when you're outside the EEA, Turkey and Israel, it'll usually charge 1%. Inside those countries it matches the other cards.

When paying by card overseas, the vendor may offer to let you pay in pounds. Say no for a better deal.

Finally, when I research foreign money I normally use euros and dollars for my tests. For some currencies the above order could change. All exchange rates from the outlets and cards listed here fluctuate at least daily.

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