How to pay abroad without losing money on the exchange rate

Card or cash: what each is actually for

For most destinations the card is the cheaper instrument and cash is the practical one. A card payment is converted by the card scheme at a rate close to mid-market, after which your bank may add a foreign transaction fee stated as a percentage in your card's terms. Cash has already been converted once, at a retail rate you accepted at the counter or the machine.

Carry cash for what cards cannot do: markets, small cafés, taxis, tips, local buses, and regions where card acceptance is thin. Keep it in small denominations, because large notes attract poor change and outright refusals.

• Check your card's foreign transaction fee and its cash withdrawal terms before you leave. The two are priced separately.
• Take a second card on a different network and keep it somewhere other than your wallet.
• Bring a small amount of local currency for the first hours: transport, a locker, a coffee.
• Use a debit card for cash. A credit card withdrawal is normally treated as a cash advance and charges interest from the day it is taken.

Always decline dynamic currency conversion

Dynamic currency conversion is the offer, at a foreign card terminal or ATM, to charge you in your home currency instead of the local one. The screen shows a familiar figure, a rate, and often a reassuring line about a guaranteed price. Decline it every time and choose the local currency.

When you accept, the merchant's payment provider sets the exchange rate rather than your bank, and it sets it with a margin that is usually far wider than your bank's. Your card's own foreign transaction fee still applies, because the payment is still made abroad. What was offered as a convenience is a second markup on the same purchase.

• At a terminal, pick the price in the local currency even though the amount looks less familiar.
• At an ATM, refuse the options offering conversion or a guaranteed rate, and accept the one that quotes no rate at all.
• On a hotel or car hire bill, check the currency printed on the slip before signing and ask for it to be redone in local currency if it was converted.
• On a foreign website, compare the home-currency price offered at checkout with the local-currency price before choosing.

Where the worst rates live

Airport bureaux are the most expensive place to change money, and predictably so: their customers have already arrived, cannot easily walk away, and are comparing nothing. Hotel desks and bureaux on tourist streets sit just behind them. Signs promising no commission are accurate and irrelevant, because the margin is in the rate rather than in a separate fee.

Read the buy and sell rates on the board. The distance between the two is the spread the bureau is taking, and it is visible before you commit. A counter quoting figures far apart on either side of the mid-market rate has published its price.

• Change the minimum you need at the airport, then find a better rate in town.
• Prefer an ATM attached to a bank branch over a standalone machine in a tourist district.
• Ignore the commission claim and compare the two rates on the board instead.

Withdrawing cash without stacking fees

Cash withdrawals abroad usually carry a fixed fee, a percentage fee or both, plus anything the machine's operator adds on its own account. Fixed costs argue for fewer, larger withdrawals, and the risk of carrying cash argues for smaller ones. For most trips the balance is a few medium withdrawals rather than a daily habit.

Read the machine's screens rather than tapping through them. Standalone ATMs in tourist areas frequently add their own charge and push dynamic currency conversion hard, sometimes displaying a rate that is only theirs. Bank-operated machines are generally more predictable, and their screens are shorter.

Knowing what you are paying, in the moment

The useful skill abroad is not finding a perfect rate but recognising a bad one quickly. Learn one anchor before you arrive, such as what 10 or 100 units of the local currency are worth in your own money, and you will catch most overpricing in a shop without doing arithmetic.

For everything else you want a converter that works with no signal. All Currency Converter keeps the last synced rates on the phone, so you can check a menu price with roaming switched off in a basement restaurant, and a rate synced a day or two earlier is easily accurate enough to tell you whether a price is fair.

Keep receipts for large purchases. If a bill was converted into your home currency without your agreement, your card issuer can often take it up, but only if you can show what currency the slip was written in.