Spending Money Abroad: Should You Use Credit Cards, Cash or Travelers Checks?

cashIf you’re traveling abroad, you’ll need to make some decisions about how you’ll actually spend some cash. Usually, the choice will be between credit cards and debit cards, cash and travelers checks. And everyone seems to have a different opinion as to whether you should take money out as you go with a debit card, bring cash with you, or take traveler’s checks.

Credit and debit cards

My recent post on what to consider when using credit cards in foreign countries highlights some of the things to think about if you’re planning to rely on credit cards during your trip. If you choose a credit card that doesn’t include hefty transactions fees, you can overcome some of the potential downsides of using credit cards abroad, but other things to consider include interest fees and charges for withdrawing money on your credit card.

Prepaid Currency Cards

If you want a safer alternative to using a credit or debit card, you may want to think about a prepaid currency card. This involves a set amount of money being loaded onto the card in foreign currency from your bank account, a cash transaction or another credit card before you travel. If you spend all of this, you’ll need to make sure to have more foreign currency loaded onto the card. Some possible fees to watch out for include application fees for signing up for the card in the first place, charges for overdrafting, bank deposit fees (if you’re choosing this option to load money onto the card), and charges for having lost or stolen cards replaced. The exchange rates on prepaid cards are usually quite high, so you probably won’t get particularly good value for your money with this option.


If you’re going to take cash with you, take the time to research where you can get the best conversion deal. One big advantage of using cash is that fluctuations in the exchange rate can’t make your trip more expensive once you’ve converted into local currency, whereas this can be a problem when using credit or debit cards.

Travelers Checks

Travelers checks can be more secure than plastic and cash, because your signature is required to validate the checks and prove that you were the person who bought them. If you lose travelers checks on your travels, you can have them replaced as long as you made a note of the check numbers. This is a big plus in their favor. The exchange rate is set when you buy the travelers checks, so you won’t wind up paying more if the exchange rate takes an unpleasant turn when you come to make purchases or withdrawal transactions.

Unfortunately, travelers checks come with commission fees that can be up to 2% to 3%.  On top of this, you’re also likely to be hit with handling fees and there is even a charge when cashing in your checks. Another downside is the fact that they may not be accepted in some countries, especially outside of the big towns and cities. To get a good bargain, check the exchange rate on a regular basis and definitely don’t leave it until the last minute to buy your travelers checks, because you may get a raw deal on the conversion.

Whichever option you choose, be sure to shop around for the best deals as fees and charges can vary quite a bit. Using credit or debit cards is probably the most popular option, because it’s less risky than carrying cash around and can be more convenient since you don’t need to rely on travelers checks being accepted or ATMs being in working order to be able to use a debit card. As long as you choose a credit card that doesn’t hit you with large transaction fees, such as Capital One, this can be your best option for foreign spending, but the wrong card can leave you facing some unwelcome charges.

(photo credit: BlatantNews.com)

  • Karmella

    Thank you for this! I have more to think about, which is a good thing.

    • http://www.sallyaquire.co.uk Sally Aquire

      No problem – it was inspired by your comment on my credit cards post so you can take some of the credit!

  • http://madsaver.com Mac

    Thanks – definitely gives me something to think about the next time I’m abroad. Didn’t realize Traveler’s Checks had so many hidden fees and never even heard of the prepaid currency cards!

  • Em D.

    I think the destination is what will really determine the option you choose. Go on travel forums for those countries and see what other people have done and when. I like to always have some cash on me (crisp, new $20 bills- old ones often get rejected by banks) preferably in my money belt, strapped securely to my person along with a backup credit or atm card. I don’t know haw many times I’ve seen people pull their money belt out of their bag- that defeats the purpose of having one to begin with.

  • Gina

    I still think that Travelers checks are the best deal. Yes, you are paying a fee, but it is well worth knowing that you can recoup your money if lost or stolen.

  • http://www.moneyrelease.com Victorino

    If I have cash (not so much to bring), then I would use cash, because that will not make me a borrower that pays finance charges. But if cash is so dangerous to carry, travelers checks, as the name suggests – are ideal for travelers.