Travel Money: Cash vs Plastic vs travellers Cheques

The UK market for Traveller's cheques has been in steady decline for a few years, despite the overall increase in travel.  (source Mintel Market Research - Holiday money UK).  This has been caused by a number of factors, not least being the increased issuance of credit cards and debit cards, and the extent to which they are accepted abroad.  Support for the use of cards and the undermining to Travellers Cheques has been further eroded by the massive growth in the worldwide ATM network. This is coupled with the perception (and fact) that TCs can be a pain to cash. Especially at weekends or if you run foul of local bank holidays (quite likely in Spain where there are local bank holidays!)

I can cite my own example of this.  trying to pay by credit card in an Ibiza restaurant in 1988 was an offline transaction that had to be supported by a passport and they were most reluctant despite displaying the Visa symbol.  Fast forward 20 years and you have no problems using cards in restaurants and bars, even in out-of-the-way places.  The problem is more likely that your card issuer will 'stop' the transaction as suspect because it is not chip and pin.  It is now routine to pay in Supermakets and virtually all shops by card; this wasnt the case a few years ago when cash was still king. 

Cash and Travellers cheques do have one big advantage for the budget conscious its much easier to keep track of what you're spending especially if trying to keep to a daily budget! 

One of the reasons I decided to write about this topic was that I came across a post on Galavanting .  Essentially they were saying why take TCs, you find it hard to pay with them, you get charged to buy them or to cash them or lose in the exchange rate. These are all true - you also have to keep track of which ones you use.

However I can give you one reason to use them:  if you only have one card, if you are travelling alone, if you are travelling in remote areas.  If some or all of these apply think on this.  The reality for most card issuers is not like the old ads -  they will not be rushing you a new card within 24 hours. If you lose your card, have it stolen, the mag stripe and or pin packs in, then you have a problem if this is your only means of payment and getting cash.  Your card could also get skimmed (ie cloned) and then maxed out. If any of these things happen you possibly have a huge problem.

Never ever ever travel with only one means payment and a bit of cash.  Always have a back up and dont travel with it if possible. If it is not possible keep one/some on your person and one/some secreted in your luggage somewhere secure.  This applies even if you are travelling with a partner - there is always the possibility of both being mugged.  Wiring money from friends or relatives is expensive and fraught  - especially if you and they have not done it before.

Dont carry more plastic than you need at one time:  Anyone who has lost a wallet or purse knows the heartache of having to ring round cancelling half a dozen cards.  This is even more painful abroard.  Take cards you wont be using out of your wallet and leave them at home, in your room or hotel  (hide them or put them in the safe).

Try and avoid running your cash down to the last cent/penny/euro before getting more.  Always keep one large denomination note somewhere safe. Dont forget flights can be delayed on the way home as well as the way out - so dont spend it till your confident it is safe to do so.  Relying on your airline or tour operator to provide you with emergency food and drink would be a fools paradise, as they only provide the bare minimum where there are substantial delays.

Cash versus Card

Obviously it is unwise to go around carrying large amount of cash. Well I say obviously but I know some people do this.  If you are not careful this will attract attention and increase your chance of being robbed.  Having to dive into a money belt just draws attention to the fact your wearing one - so avoid this by carry ready money in a purse or wallet. 

Ok so cards win out over cash on security grounds - and we've discussed some of the back up strategies for cards.  But when it comes to making purchases which is the better route (pay by card,  exchange money using your card, or get money from an ATM).  This is much less clear cut and depends largely what type of plastic you pack.

Bear in mind if you use a credit card in a bureau de change (BdC) your card company will probably treat it as  a cash advance and clobber you for interest and 1.5 to 2.5%, as well as any charges made by the BdC.

If you are given the option to pay by card but in sterling (or your native currency) there will probably be a hidden agenda, like the exchange rate you get will be very poor.  This is called dynamic currency exchange as a rule always decline this offer.

These days most card companies charge you a % of the transaction if it (the purchase) is not in your native currency.  This does vary widely. It started a few years as as a modest 0.75% and has been steadily climbing ever since as it not something most of us consider when choosing a card.  It can now be up to a massive 2.75%

Typical (but is does vary widely) debit card charges for withdrawing cash from an ATM abroad are £1.50 flat and 2.75%.    However the rate of exchange is usually very good and close to the wholesale rate of exchange.  However you wont know what that is going to be.    Charges on credit cards can be similar but interest will start to accrue for the day of withdrawal (unlike with a purchase). 

As a rule if you make a purchase by credit or debit card you will get decent exchange rate and you will only have to pay the 2.75% or whatever the transaction rate is. 

Charges on debit and credit cards used abroad are now so high that I urge to check your terms and conditions so that you know what youre in for.   Bear in mind if you use a credit card you get protection on purchases over £100 (section 75 protection) you will not get this with a debit card.

You can get more information on where to exchange money and how to pay when you're abroad from our website  Holiday Travel money  page. One last tip dont wait till you get to the airport before changing money, see the travel money page, for the best. 

The best credit card on the market, currently, is Abbey's zero card which at the time of going to (word)press doesnt make transaction withdrawal charge for cash and has no Forex loading.  But you do pay interest from the date of withdrawal. 

Debit cards of note are Nationwide flex account Visa debit card.  This beats every card out there, even specialist credit cards as it doesn’t load, doesn’t charge ATM fees and is interest free (unless you’re overdrawn).  However you need to open a Nationwide current account.