MARTIN Lewis has warned holidaymakers of a simple rule to follow when spending money abroad.
The money expert returned to screens last night in a summer special of the Martin Lewis Money Show, revealing how holidaymakers can avoid extra charges.
The idea of paying in pounds may seem like an obvious option as we know its value and the currency usually linked to the card.
However, if you choose this option, you may pay more when you tap your card on the foreign machine.
This is because the foreign bank will do the conversion to pounds and the rates are less favorable.
If you choose to pay in the local currency, your card will do the conversion instead, which is usually much more beneficial.
And if you use a specialized travel card, you’ll get a “near-perfect” exchange, while those who don’t use the card will likely have to pay a 3 percent fee.
So you should always choose to pay in the local currency when asked, and not choose the option to pay in British Pounds.
Lewis said: “When you pay in plastic abroad, you always pay in foreign currency – you don’t pay in pounds.
“Here’s the reason: if you pay in pounds it’s the foreign ATM or shop that does the conversion and every time I’ve tested this – and I’ve done this many times – it’s a trouser exchange rate.
“If you pay [in the foreign currency] it is your card that does the conversion. If you have a specialized card you will get a near perfect exchange rate. If you are not a specialist, it will cost you 3 percent, but that is usually still better than the foreign machine.
On tonight’s show, Lewis also talked about the best places to withdraw money and take it abroad when needed.
He said the best place was to compare rates online and then place an order. According to him, the worst place was the airport, where you would pay the highest costs.
He said: “If you only want cash for travel abroad… go to a comparison tool and get the best rates. So for $1,000 you’ll pay less than £800 for the best rates, £810 or more on the high street.
“Do it at the airport and it could cost you as much as £950. If you’ve left it so late you have to do it at the airport, call them up and reserve your money in advance – you’ll get a better rate.”
THE BEST MAPS FOR USE ABROAD
Debit cards
Chase Bank has no fees on spending and withdrawals abroad and gives you one percent cashback on all your spend, with a maximum of £15 per month for the first year.
Starling also does not charge fees for ATM spend or withdrawals.
Monzo doesn’t have an exchange rate mark-up, but you can only withdraw £200 for free from an ATM over a 30-day period unless you have a Monzo premium or plus account.
Santander cardholders may be able to use Santander ATMs abroad without being charged any fees. Please check the details of your card.
Credit cards
The Barclaycard Rewards card does not charge fees for spending or cash withdrawals abroad.
There is also no interest on cash withdrawn as long as you pay it back when your next bill is due, but ATMs may still charge a fee.
The Halifax Clarity card doesn’t charge fees for spending abroad or withdrawing cash, but you will be charged interest on cash withdrawn from the time you withdraw, so pay it off right away .
Are there other options to spend money abroad?
There are several specialized cards that can offer you a great exchange rate.
These cards include travel credit cards and prepaid cards that allow you to pay abroad without fees or at a fixed exchange rate.
Senior Consumer Reporter Olivia Marshall explains all the options.
Travel credit cards: Travel credit cards allow you to spend money abroad without incurring fees or hidden charges.
But they may still charge you for withdrawing cash.
We recommend Halifax’s Clarity Card as there are no fees for using it abroad, nor are there any fees for withdrawing cash.
But if you don’t pay off your balance in full, you will be charged interest at a rate of 19.9 percent.
And you’ll be charged interest on withdrawals until your balance is paid off too, at a rate between 19.9 and 27.95 percent, depending on your credit score.
In other words, just because you use plastic abroad doesn’t mean you don’t have to pay off these credit cards as you normally would.
Always pay off your balance before the end of the month with these cards to ensure that the money you’ve saved isn’t wiped out by paying interest.
To learn more about travel credit cards, read our guide here.
Prepaid cards: An alternative to carrying cash is to purchase a prepaid card.
These cards allow you to put a fixed amount of cash on the card at a fixed exchange rate.
So if the rate is good at the moment, you can put money on your card and it will remain even when you are on holiday.
Keep in mind that these cards can sometimes have hidden fees and charges, so make sure you read the fine print.