Holidaymakers should shop carefully for the best way to spend money abroad as new data reveals the high cost of spending on your cards while on holiday.
According to analysis from financial information firm Defaqto, debit cards are the most expensive way to spend money in Europe. Indeed, the smaller the payment the worse the financial penalty for using the card.
For example, if you spent €5 a day on breakfast over the course of a two-week holiday, it would add £21 in costs on top of €70 spent.
Credit cards, however, have been found to be the cheapest way to spend abroad. An evening meal that costs €25 would attract, on average, between 31p and 66p in charges on a credit card. While credit cards have the added bonus of protecting spending between £100 and £30,000 under Section 75 of The Consumer Credit Act, withdrawing cash from an ATM using a credit card abroad or at home can be eye-wateringly expensive, often attracting higher interest rates.
Defaqto has broken down the average cost of debit and credit cards abroad depending on different amounts of money spent. See the table below:
Based on an exchange rate of £1 = €1.14036. Source: Defaqto, May 2018.
Pre-paid currency cards or good old cash are the other options when it comes to spending abroad.
However, both have significant drawbacks. Pre-paid cards have high fees, according to Defaqto, or other catches such as high reloading or renewal fees. Some have expensive non-Sterling exchange fees and should be avoided. These kinds of cards will often attract issues when any kind of pre-authorised payment (such as at a petrol station or car rental) is required.
Cash is often seen as the easiest, cheapest solution. However, Defaqto says that high-street exchanges will often promote a no-commission policy, but in reality work out costing the same as credit cards, owing to poor exchange rates.
Buying currency at your bank or at the airport often incurs even more expense. Carrying large amounts of cash while abroad also carries the risk of theft or loss.
To find the best value product for your holiday, check out the Moneywise best cards for overseas spending guide.