Like hundreds of school leavers, my 17-year-old daughter and a group of friends are planning an Interrail trip visiting various European countries during their post-A-level summer holidays.
They are a pretty sensible bunch, competent enough to make their own travel arrangements, plot their route and book hostels for stops in Amsterdam, Berlin, Prague, Croatia and Budapest. But when it comes to travel money and how they are going to exchange their hard-saved sterling and access the four currencies they will need en route (euro, Czech koruna, Croatian kuna and Hungarian forint), not to mention keeping their cash and plastic cards safe, they are not quite so savvy. The parents’ nightmare vision of their child stranded abroad with no money when their cash and/or cards get lost or stolen looms large.
However, it’s also about making sure they – not to mention mum and dad – don’t get a nasty shock when they return to their statements. There are huge variations between banks when it comes to the fees for using a debit card abroad. So what’s the best advice to give them, and is there anything parents can specifically do to protect their interests?
The basics
Travel money wisdom suggests people take a small amount of relevant currency for at least their first stop – enough to see them through their first day or two until they can access a cash machine or bank. British Interrailers who will need several different currencies might take a small amount of each.
Basic safety rules obviously apply. Never carry too much cash, and any that they have should be kept in a money belt under their clothes along with any cards. Whenever possible excess cash and cards should be left in safety boxes or lockers (it’s a good idea to take their own padlocks) provided by hostels. Between stopovers, cash and cards should be spread across different places in backpacks and on their person.
Plastic pitfalls
They will need payment cards – ideally more than one in case it gets lost or stolen – in order to pay for goods and withdraw money from ATMs, though an emergency back-up credit card is obviously not an option for 17-year-olds, because they can’t apply until they are at least 18.
You might assume that your child should rely on the UK debit card connected to their current account to fund their travels, but this could prove pricier than you realise.
First, if using a debit card abroad make sure the bank is told beforehand. If it has no prior warning it may well decline genuine transactions or block the card if it detects “unusual activity”.
Second, it is vital to find out what if any charges will be levied if they withdraw cash at an ATM or pay for goods in shops, hostels and restaurants. Some charge a lot more than others – notably Halifax, Santander, Bank of Scotland, Lloyds and TSB, which the MoneySavingExpert website has dubbed “the cards from hell”.
Withdrawing cash from a machine may incur a charge of around 2.75%-3% in hidden commission. Users will also typically be hit with a separate ATM fee that is usually expressed as a percentage of the amount taken out. For example, NatWest’s ATM “foreign cash fee” is 2% of the value of the transaction (minimum £2, maximum £5).
If they have a Lloyds, Santander, Halifax or TSB debit card they should watch out: all these banks impose a fixed fee for overseas purchases in shops, restaurants etc – on top of the 2.75%-2.99% they take off you for currency conversion. This fixed fee is £1.50 at Halifax, £1.25 at Santander and £1 at Lloyds and TSB (there may be some types of account that don’t impose this charge). It is applied on each transaction and makes smaller purchases hellishly expensive. Spend £5 on a pizza, for example, and it will cost you at least £6.
Forewarned is forearmed. If your child is stuck with one of these cards, they will at least know they are better off withdrawing one lot of currency at an ATM every few days rather than paying for small purchases and using cash machines for lots of small amounts.
Prepaid cards
There is a potentially cheaper alternative worth considering: a low-cost prepaid currency card. These are like a modern version of travellers cheques. You child pre-loads them with money – sterling if travelling to several countries with different currencies – and when they use the card their pounds are converted on the spot into each relevant currency using the latest exchange rate.
The fees charged vary a lot, with some working out more expensive than using a debit card. Decent ones include Revolut, which offers exchanges into more than 80 currencies at “perfect interbank rates” – the top rates banks give each other. Revolut says it offers the very best exchange rate available and charges no fees – though that is onlyguaranteed for the first 12 months of being a customer. Revolut is managedvia an app only, so the user will need a smartphone – something that will no doubt appeal to mobile-savvy youngsters.
Transfers between Revolut users in pounds, euros or US dollars are instant and, currently, free anywhere in the world, so parents could open up their own Revolut account so they can top up and transfer funds to their child in case of an emergency.
Also worth considering are FairFX’s currency cards – it offers euro, dollar and “anywhere” versions. The latter card can be used in more than 200 countries, and the holder loads it with sterling which will be converted into thelocal currency with a pretty low 1.4% charge.
It’s free, so long as you load £50 or more on to it, and can be managed via an app or online, so parents back home could once again top up funds if necessary. It charges £1 to withdraw cash from overseas ATMs and, perhaps strangely, £1.50 to do so from a UK ATM, so it is probably best to use up the balance when overseas.
And finally …
If there is the option to pay in pounds as opposed to the local currency at an overseas hotel, shop or at an ATM, the answer should be “no”. Always choose the local currency – the card will give a better conversion rate than the merchant is able to offer.
Top credit cards for foreign trips
Anyone aged over 18 looking for cheap foreign spending, plus low-cost access to their cash via an ATM, has a host of choices, not least because they can apply for a credit card, writes Miles Brignall.
Two currently stand out. The Halifax Clarity is a Guardian Money top pick because, provided you pay off the balance in full at the end of the month, you will pay no ATM fees worldwide, or fees or interest loading when you pay for goods in shops or restaurants. But you will be charged interest at 18.9% on ATM withdrawals until you pay off the balance. This equates to about £1.50 a month for every £100 withdrawn, assuming you are accepted at the headline interest rate and pay it off ASAP.
Meanwhile, Creation is offering the same deal but with a lower APR of 12.9%. This equates to about £1 a month for each £100 withdrawn (if you get this APR). Creation provides cards for the many of the big retailers such as Asda and Argos.
With both cards you can minimise the those already low interest charged by transferring money to the credit card account via online banking straight after making the withdrawal. This only works if you pay off the balance in full, but will be much cheaper than using a debit card.
