An important factor when travelling abroad, is the cost of banking transactions. Little do some know, when using their debit or credit card abroad, there can be hefty penalties.
These 'penalties' come in a multitude of banking fees:
- Transaction fee for non sterling currencies: This is added on to the exchange rate, and can inflate it by around 3%
- Cash withdrawal fee
- Interest charges on credit cards, even when paid in full
- Additional penalties for each transaction, depending on card.
There is a very useful article over at Money Saving Expert (MSE), which is updated on a weekly basis.
To summarize, you can check your existing cards overseas fees, and check which cards currently offer the best deals on spending abroad.
Top Credit Card
From a convenience point of view, the article recommends using a specialist credit card and, whilst this may be useful it still costs money to withdraw cash. You have to pay interest on the balance withdrawn until it is paid in full. The exchange rate is also slightly more economical being MasterCard and not Visa.
The credit card option is great for spending, as there are no fees as long as it's paid off in full when the statement is due.
My Recommendation - Fee Free Debit Card
If you are planning a longer (multi-month) trip and have a budget in mind, the most economical option at time of writing is a debit card. The Norwich & Peterborough Gold Classic current account offers an internationally fee free debit card.
While MSE recommend this card, they comment on the hassle of changing bank account in order to obtain it. This is not necessary, you can just have multiple current accounts with different banks.
There is a £5/month account fee, which can be avoided by paying £500/month into the account, or having a balance of at least £5000 at all times.
If you are planning a RTW trip, it is highly likely that your budget will be at least £500 a month (more likely £600+), hence you can easily make use of this card without any fees. In any case, if your budget is less then just set up two standing orders to cycle £500 in and out of the account each month.
This is a Visa card, with a slightly more costly exchange rate than MasterCard, however it is transaction fee, and withdrawal fee free worldwide. The only fees you may incur are those of ATMs which you use to withdraw cash.
Managing Your Banking Whilst Traveling
I would suggest you only carry the above debit card, and a credit card for backup. Keep the balance of the debit card account to the absolute minimum, A simple way to achieve this is to set up a standing order from your savings, or other current account with your monthly spending budget to your travelling account.
For example, on my RTW trip I have set a budget of £700 per month, which will be transferred from my savings account to my travelling debit card by standing order. This takes care of the £500 minimum monthly income to avoid the £5 fee. I will then use this card for all cash withdrawals and spending.
If the worst happens and I get jumped and my pin number is obtained, my liability is just the balance of that account. If I need to adjust the balance of the account I can use online banking, with no need to carry debit cards with large balances on them.