For 20 years I've been pretty lackadaisical with how I access my money abroad. At the very beginning I still used traveller's cheques (this was 2003) but ever since it's been a mixture of cash and cards. I've never got totally ripped off, but have certainly been skimmed by the bank for probably 10% or so. What with the cost of living being up and the pound being so weak, I wondered if there was a better way of doing things.

Turns out there is, pretty much using accounts I already had. We really are getting into the extremely boring weeds here, so sorry about that. Everything here is also highly specific to UK citizens with sterling bank accounts spending money in the eurozone. This is mostly a note-to-self ... most importantly, please don't take anything I say as financial advice!

Heart

1

Comment

0

Link

Log in to comment or reply

1. On these sorts of trips I generally end up withdrawing cash, generally €150-€200 at a time in western Europe (less elsewhere). This was historically convenient in rural areas since (i) I have very little worry about me being mugged or it being stolen [me losing it because I'm a klutz is much more likely] and (ii) cash would be accepted everywhere, cards might not, and indeed in some places my cards stopped working intermittently (e.g. Romania in 2007). Breaking large e.g. €50 notes might be the only annoyance. 

You can get cash in advance. For a major currency like € this is a terrible ripoff. Under no circumstances change money in airports or on ferries!

Withdrawing cash from an ATM should be done with a debit card against money you have in your account (or your overdraft if you're really strapped). It's not terrible, but you'll generally pay a ~3% bullshit "ATM fee" and be given a Euro conversion rate ~3% poorer than the European Central Bank (ECB) rate. That's for "free" bankomats - some private ATMs, e.g. in pubs, also charge their own exorbitant fees on top (never use these).

However, since the pandemic touch card acceptance in much of Europe has become pretty universal, even in out-the-way places and for tiny vendors - no longer is paying for a drink in a pub or an ice-cream with a card a massive faux-pas. This is rather (culturally) variable between countries though. Germany remains very keen on cash, for example. So relying on withdrawing cash from ATMs is less important - though I'll always carry some for emergencies.

Another bonus - less coins in change. Never mind the financial value - the sheer weight of the bloody things on a bike tour is a burden.

2. Paying for purchases in euros (or other major currency) using a card linked to a bank account in sterling is mostly fine. You typically escape the fees associated with ATMs, but you still get charged an exchange rate with a "load" (markup) of maybe 3%.

One thing to watch out for that has become very common is merchants' payment systems offering to "auto-convert" charges into your home currency. These universally give terrible exchange rates, skimming 10% or more off the bill. So it's always better to accept charges in Euros (or whatever) and let the banks do the conversion.

Right, we can beat this.

3. For purchases, a credit card is significantly better. A good credit card - and, by chance, I already had one which is ideal for this purpose but I barely use - will charge you 0% markup on purchases in other major currencies - i.e. you will get close to the perfect (true) interbank exchange rate. 

Other benefits of using a credit card are: (i) your purchases are all protected (if they are defective or there is some breach of contract) under some very strong laws in the EU/UK called Section 75. Basically if something goes wrong, you can just get the money back immediately from the credit card provider (and they have to go to the trouble of pursuing the merchant). (ii) Many car or other hire companies require a credit, not a debit, card to hold deposits. Those that do allow debits might take very large deposits, and may actually remove that money from your account (meaning you must hold those funds, or pay high overdraft rates).

Your credit card may not be as well-suited as mine is (mine is "The Natwest credit card" - yes, that's its un-googlable name). If so, it may be worth applying for a specific travel credit* or prepaid card.

4. But it's a bad idea with credit cards to withdraw money. This is a cash advance, and you will be charged every-which-way: there will be a withdrawal fee and you will pay an immediately high rate of interest from day 1. I think it even hits your credit rating.

5. Recently in the UK a new generation of highly flexible online banks have started to offer free, or almost free, banking in euros including debit cards. Starling offers a debit card that allows you to withdraw money in your (£ sterling) account in euros at an ATM, and pay no fees whatsoever. Moreover, they give you a perfect ECB interbank exchange rate.

What's the catch? Not much of one. The card is backed by a proper bank account - it's free to set up* - so you just need to make sure that you have money in your account to withdraw. If you think you might run low, it's a good idea to apply for and activate an overdraft facility* as a buffer. If you don't, either purchases/withdrawals may be denied or (worse) you may create an "unarranged overdraft", be hit by fees and give your credit rating a pummeling.

Actually, Starling used to be even better. Their accounts are actually twinned - you get both a real Sterling (£) and Euro (€) bank account when you sign up. The euro account can execute business 100% in euros, it has an IBAN and SWIFT number - it is a real European bank account. It used to be possible to transfer money arbitrarily between € and £ completely for free and at ECB rates. However - this seems to have basically allowed people to become their own currency traders and perform freakin' arbitrage, and Starling now discourage this by making a (modest) charge for conversion between your two accounts. But making purchases or withdrawing cash is still free.

However, there is a subtlety here. Because it used to be the case that the euro account was the natural one to use when withdrawing/paying in € abroad, by default the Starling card will take money from the euro account. But to pay into that from sterling you need to pay a (small) conversion overhead. So make sure you flip the switch so € payments come out your £ sterling account. It's as simple as that.

6. It used to be the case that you really needed to tell your bank you were going abroad, or the buggers would sometimes cancel your card leaving you in the lurch. Post-pandemic this seems to be being phased out - with my bank there's no longer a need to do this, and they seem pretty relaxed about just going and using cards in Europe (if you are going to more unusual destinations your mileage may vary!).

-------------------------------------------------------

Sigh. I'm definitely in over-planning mode.

Electrifying stuff, I know. But satisfyingly I already had both a good travel credit card and a Starling account set up. I had never even touched the Starling account for 3 years - I applied when Brexit was going through and I seriously considered converting all my savings into Euros, but then the pandemic hit so was pretty much stuck with sterling anyway. So I was very pleased when I managed to load the account with some dosh and pay using the card. I also have my standard bank cards as an emergency backup.

The tl;dr is that I'll:

• Withdraw Euro cash as and when using my Starling debit card, after transferring sterling into that account (which I can do any time online).
• When convenient/socially acceptable pay for purchases using my credit card. I expect supermarkets, shops and hotels will be fine with this - campsites and small vendors might prefer cash.

For anyone who doesn't have these, it's well worth looking into. Items marked with (*) require a hard credit check - UK residents will know that these can have quite serious repercussions for your credit rating (ironically, having your rating checked in itself reduces your credit rating) so do think carefully before doing them!