In order to fully enjoy your holiday, it takes a bit of planning before you go. You need to book accommodation, flights and any popular activities in advance. And you also need to sort out how you’re going to pay for anything you’re buying when you’re away. So what is the best way to pay abroad? Your alternatives will come down to prepaid cards, debit cards, credit cards, and cash. Each of these have their own advantages and disadvantages. In this article, we’re looking at the reasons why you’d pick a payment option, as well as the reasons to avoid it.
Cash is a classic, and many people feel a little safer bringing at least some emergency cash when going abroad. It’s not a bad idea to give yourself several options, but is cash truly king still?
The benefit of cash is that your currency is exchanged in one go, and to a certain extent you can choose your exchange rate. We hope you already know that you shouldn’t get your cash at the airport! One option is getting your cash through Caxton’s cash delivery service, which offers great rates and low fees for cash delivery up to the equivalent of £5,000.
However, cash has one major drawback – if someone steals it, or you lose it, there is no way for you to get it back (short of a miracle). It is the least protected method of paying abroad. Its usefulness also differs depending on your destination. While cash is widely accepted in many less developed countries – and at street markets may be your only option – several countries are now functionally cashless. Check before you go to see what the situation is in your destination country, to ensure you’re not left with currency you can’t use.
One main benefit of debit cards? Almost everyone has one. It’s likely to be the payment method you use the most at home, so it’ll be convenient and you’re unlikely to forget details like your PIN etc. It also has a huge advantage over cash in that if you lose it, you can block the card and protect the remainder of your money. And unlike a credit card, you won’t be tempted to spend money you don’t have – once you’ve spent it, it’s gone.
However, there are a number of disadvantages that make debit cards a less desirable alternative to pre-paid cards or credit cards.
Firstly, you’re unlikely to get a favourable exchange rate from your bank, so compared to almost anything else (except buying cash at the airport!) you’re losing out on the rate. Your bank is also likely to charge fees for purchases and withdrawals, making you lose out in another way. And unlike a credit card, if your debit card does get stolen, any money that the thieves have already spent is unlikely to make its way back to your account.
Credit cards are a popular option for payments abroad due to the extra protections it offers when compared to using your debit card. While a debit card gives direct access to your bank account, a credit card offers an extra layer of security, since you’re not paying directly to the merchant. Instead, the credit card company pays on your behalf, and because of this, any fraudulent transactions can potentially be stopped before you personally have to pay for it. You typically also get a more favourable rate than using your debit card.
Another benefit is the rewards that your credit card company may offer. These differ depending on which card you have, but it’s common to receive insurance, access to airline upgrades and rewards points on purchases.
However, there are some disadvantages to using a credit card as well. While the exchange rate is often better than the one offered by your bank when using your debit card, it is not always the best, and many cards charge fees for every purchase abroad. You also risk overspending if you don’t keep an eye on your purchases, as the limit on spending might be higher than your intended travel budget. Finally, because of the high fees charged by providers like American Express, credit cards may be less widely accepted than other options.
Pre-paid currency cards, or travel money cards, that you can load with the currency used in the country you’re going to is a relatively new option that has gained popularity due to the convenience and safety they offer. In some ways, they could be considered “the best of both worlds” when compared to cash and debit or credit cards.
Pre-paid currency cards often offer among the best exchange rates since you’re not asking for on-the-spot conversions. Loading the card with the currency you’re using means that you already know what your money is worth, and since you’ve converted your entire travel budget at the time of loading, you pay less fees than when using your debit card. It’s also a safe option since it’s not connected directly to your bank account, and if you were to lose it, a good card provider will help you block it instantly to protect your balance.
So while a pre-paid currency card is a good option, it’s worth making sure that you get the best currency card for you. The Caxton Card offers favourable exchange rates, fee-free spending in over 35 million locations worldwide and a simple app to help you with any queries – including swiftly blocking your card in case of emergency.
| Pre-paid Card | Debit Card | Credit Card | Cash | |
|---|---|---|---|---|
| Simple to use | Yes | Yes | Yes | Yes |
| Protected in case of theft | Yes | Somewhat | Yes | No |
| Widely accepted | Yes | Yes | Somewhat (less so with Amex) | Yes (although beware cashless countries) |
| Favourable exchange rates | Yes | No | No | Yes/no (depending on where you exchange!) |
| Fee-free spending | Dependent on provider (Caxton offers fee-free spending in 35 million locations, and charges no hidden fees) | No | No | Yes |
| Effective budgeting tool | Yes | Somewhat | No | Yes |
| Potential for rewards | Dependent on provider | No | Dependent on provider but most offer points or other rewards | No |
Make sure that you’re getting the best rates and fee free spending abroad by using your Caxton currency card. Apply for yours today, or top up your existing card.