The summer holidays are nearing, and many people will be excited to head abroad for a break – and hopefully more reliable weather. There’s no getting away from the cost of a holiday – it can often be a family’s biggest lump-sum expense each year.

But you can cut the overall cost if you avoid unnecessary charges, transaction fees or interest costs by using the right type of holiday money.

Whether you’re using cash or card, here are the best ways to cut your spending costs. 

CASH

At all costs avoid currency-exchange booths in airports – they are relying on a captive audience and will often charge the worst rates for your money. You also want to avoid using a credit card to pay for your travel cash, as often it will be charged as a cash advance and incur a fee.  

Buying travel cash at a currency exchange ahead of traveling will be the best option for cash you want to take with you. You can pre-order your currency online with a number of firms, which effectively secures your rate. If you then get to the currency counter and the rate has moved in your favour you can usually ditch your pre-order and get the better rate.  

DEBIT CARD

If you’re going to be spending on a card abroad it’s a good idea to get a travel-friendly card rather than using your usual debit card. You’ll get a better exchange rate, dodge transaction fees and often get fee-free cash withdrawals abroad.

Standard cards usually charge a 3% fee for spending abroad, may add on a flat-rate purchase fee and will often charge a cash advance fee for withdrawing cash.

It does mean that you have to apply for a new bank account and pay money into the account – although you can easily transfer money through online banking when you’re abroad if the account runs out of money.  

One example is a Chase account, which is app-only, and means you can spend and withdraw money with no fees. You’re limited to £500 per day in cash withdrawals and up to £1,500 a month for withdrawals made outside the UK, which means it may not be ideal for those who spend big on holiday. 

Another option is First Direct, which also doesn’t charge fees for spending or ATM withdrawals overseas. It has a £500 per day limit on cash withdrawals but no monthly cap, and you can get a £175 switching bonus if you move your existing bank account. 

CREDIT CARDS

If you prefer to put all your spending on credit cards and pay it off after the holiday, then getting a travel credit card can reduce your costs. You just need to be certain that you won’t end up overspending because it’s on credit.  

One option used by lots of travelers is the Halifax Clarity credit card, which charges no fees on spending abroad and allows you to withdraw money fee-free. You won’t be charged interest on spending if you pay off your bill in full, but you will be charged interest on cash withdrawals.

Barclaycard Rewards card offers a similar deal of fee-free spending and cash withdrawals, with no interest on either so long as you repay in full. You will be charged interest if you don’t pay off your bill though, so beware of overspending. 

DON'T PAY IN POUNDS

Whether you’re spending on a debit or credit card, you need to be careful not to get caught out by paying in pounds when spending abroad and getting a far worse exchange rate.

Often when you pay the card machine will give you the option of paying in sterling or in the local currency – if you pay in pounds you’ll very likely be paying more for your items. Instead select to pay in the local currency and it means you’ll pay your card issuer’s rate.  

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