Spending Money Abroad: How to Avoid Card Fees and Bad Exchange Rates
Paying abroad is easy now: tap a card and you're done. But the cost of each payment depends on choices that are easy to miss, from the question a card machine asks you to the card you pay with. A few percent on every meal, ticket and cash withdrawal soon adds up over a trip. Here's where the fees hide, and the rights you have when a payment goes wrong.
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The short version
- When a card machine or cash machine asks "pay in your home currency?", compare the mark-up it shows with your own card's fee. If your card has no foreign fee, choose the local currency.
- Know your card's fees before you go: a foreign transaction fee on payments, and fees for taking out cash.
- Surcharges for paying by ordinary consumer card are banned in the EU and the UK.
- Pay by credit card for bigger things. UK credit cards give you a claim against the card company for purchases from £100.01 to £30,000, abroad too. US cards let you dispute a charge within 60 days.
- Carrying cash? Declare €10,000 or more entering or leaving the EU, £10,000 or more between Great Britain and outside the UK, and more than $10,000 entering or leaving the US.
"Pay in your home currency?" The question that costs the most
Pay by card in a shop or restaurant abroad, or take cash from a machine, and you'll often be asked whether you want to pay in your home currency, in pounds or dollars, rather than the local one. This is called dynamic currency conversion. It looks helpful, as you see exactly what you'll pay, but the conversion is done by the shop's or the cash machine's provider, at a rate it sets, with its own mark-up.
If you choose the local currency, your own card company does the conversion instead, at its rate and with its own fee, if it has one.
The rules help you compare:
- In the EU, a shop or cash machine offering to convert must show the total conversion charges as a percentage mark-up over the European Central Bank's latest reference rate, before you pay, and tell you that you can pay in the local currency instead. The same rule is still part of UK law.
- Visa's rules say a merchant or cash machine must give you the choice, must not choose for you, and must show the exchange rate and any mark-up. If you're not given a choice, Visa advises declining the conversion and reporting it to your card issuer.
What to do: look at the mark-up on the screen and compare it with your own card's foreign transaction fee. If your card charges no foreign fee, the local currency avoids paying a mark-up at all. If you're unsure, choosing the local currency keeps the conversion with your own card company, whose fees you can check before you go. Watch out for screens that make the home currency option the easy one to press.
Card and cash fees
Look out for three kinds of fee:
- Foreign transaction fees (sometimes called non-sterling transaction fees in the UK). Your card company may charge this on payments in another currency, or with a foreign merchant. It's usually a percentage of each payment rather than a flat fee. Some cards charge none, so it's worth checking yours.
- Cash withdrawal fees from your own card company. On a credit card, taking out cash is usually treated as a cash advance, which can cost more than a payment. Check your card's terms.
- Cash machine fees charged by the machine's owner, shown on screen before you confirm. Using a machine in your bank's network, where it has one, can mean lower fees or none.
In the US, card issuers must disclose their foreign transaction fees, but not fees charged by a merchant or a machine's owner, so read the screen before you confirm. Prepaid travel cards can have fees of their own, and some need registering before you can use them abroad.
Euro payments in the EU
If your bank is in the EU, it must charge you the same for a payment or cash withdrawal in euro anywhere in the EU as it would at home. This covers card payments and cash machines. Banks in EU countries that don't use the euro must apply the same rule to euro payments, and Sweden has extended it to the Swedish krona. For other EU currencies, you may still pay a conversion fee, which must be shown before you agree to pay.
This rule protects customers of EU banks. With a UK or US card, your card's own foreign fees apply.
Surcharges for paying by card
- In the EU, sellers can't charge you extra just for paying with a particular card. The ban doesn't cover cards like American Express and Diners Club, or business cards.
- In the UK, businesses can't charge a fee for paying with a consumer debit or credit card, and haven't been allowed to since January 13, 2018.
If something goes wrong: your card's protection
UK cards
- Section 75 (credit cards). If you pay for something with a cash price from £100.01 to £30,000 on a credit card and the seller doesn't deliver or breaks the contract, the card company is equally liable with the seller. It's a legal right, and the courts have confirmed it applies to purchases made abroad as well as in the UK. It doesn't cover debit, charge or prepaid cards.
- Chargeback (debit cards and others). Visa, Mastercard and American Express have rules that let your bank reverse a card payment in certain cases, for example when goods or services aren't provided. It isn't a legal right, but the bank can use it for you, and you normally have 120 days to ask.
US cards
- Disputes: under the Fair Credit Billing Act, you can dispute a billing error on a credit card by writing to the issuer so the letter arrives within 60 days of the first bill showing it.
- Unauthorized charges: your liability on a credit card is limited to $50.
Our guide to UK and EU flight rights explains how Section 75 helps when a travel company goes bust.
Carrying cash: the limits to declare
Carrying a lot of cash isn't illegal, but above these amounts you must declare it:
| Where | Declare |
|---|---|
| Entering or leaving the EU | €10,000 or more per person, including travelers' checks and gold coins or bars |
| Between Great Britain and a country outside the UK | £10,000 or more, counted for your group in total. You can declare from 72 hours before you travel, and the penalty for not declaring is up to £5,000 |
| Northern Ireland | €10,000 or more, to or from countries outside the EU, and when arriving from Great Britain |
| Entering or leaving the US | More than $10,000, counted for a family or group together, on FinCEN Form 105. Not reporting can mean the money is seized |
Before you go
- Check your cards' fees for payments and cash abroad, and consider a card with no foreign transaction fee if you travel often.
- Take two cards, ideally on different networks such as Visa and Mastercard, and keep them in different places, so one lost or blocked card doesn't leave you stuck.
- Check whether your bank wants to know where you're going, so it doesn't block payments abroad as unusual, and save its number for lost or stolen cards.
- Take a little local cash for small places that don't take cards, and tips.
- Book big things on a credit card for the extra protection.
- Check your statement when you're home, and query anything you don't recognize.
Neatrip keeps track of what your trip costs. Enter each booking's cost in whatever currency you paid, and it's shown in your home currency at the exchange rate of the day you entered it, with payments, deposits and what's still due. Bookings are sorted by cost, so you can see where the money went, and share the trip with the people paying with you.
Sources
- European Commission: currency conversion transparency requirements (Regulation (EU) 2019/518); the Cross-Border Payments Regulation as in UK law, Article 3a
- Your Europe: payments, transfers and cheques (euro payments, surcharging)
- Visa: dynamic currency conversion
- UK: Consumer Credit Act 1974, section 75; Office of Fair Trading v Lloyds TSB Bank (Court of Appeal, 2006); FCA guidance on refunds; Consumer Rights (Payment Surcharges) Regulations 2012, regulation 6A; bringing cash into the UK
- US: Regulation Z, section 1026.4 and prepaid card fees (CFPB); using credit cards and disputing charges (FTC); money and travel (CBP)
- EU: cash controls
This guide explains the rules in general and isn't financial or legal advice. Card fees and terms vary, so check your own card's. Spotted something out of date? Tell us at support@neatrip.app.