Travel Money: What are your options? And which is right for you?

Every way, weighed-up

We all need cash when we travel abroad, but with so many different ways of exchanging money, and so many hidden charges lying in wait, how do you know you're getting the best deal?

We weigh up the options.

1. Get cash out before you go

• Ease: 7/10
• Cost-effectiveness: 6/10
• Overall: 6.5/10

Withdrawing your money before you go can set your mind at rest, but first there's the question of where and how to do it. You'll often get the best rates online from companies like Travelex and ICE, but be wary of delivery charges which can be slapped on top if your order isn't big enough. On the high street the Post Office and M&S offer 0% commission and decent rates (though not the interbank), but you should avoid exchanging money at airports at all costs, as their rates are some of the worst anywhere.

The unavoidable snag with getting your travel money in advance is it means you'll have to travel with large amounts of cash on you, which could prove disastrous if it's lost or stolen en route.

2. Traveller's cheques

• Ease: 3/10
• Cost-effectiveness: 6/10
• Overall: 4.5/10

A good way to avoid the worry of carrying large amounts of cash while travelling abroad is to make use of traveller's cheques. Their great advantage is that you can immediately have them cancelled if they're lost or stolen.

There is a bit of a but though… Traveller's cheques are a rip off. In fact, you're normally charged commission when you buy cheques in pounds sterling, and an exchange rate is applied when you convert them into local currency.

3. Third party transfers

• Ease: 8/10
• Cost-effectiveness: 10/10
• Overall: 9/10 (if you have a somewhere to send the funds)

One of the best ways to get around many of the inevitable charges is to transfer the money to a domestic account in the country you're travelling to before you leave. If you've friends or relatives living over there, you can simply have the money sent over via Wise. Your friend or relative can then withdraw the money from their account and pass it on to you after you arrive.

4. Pre-paid cards

• Ease: 7/10
• Cost-effectiveness: 8/10
• Overall: 7.5/10

Pre-paid cards are quite simple, really. You upload currency (dollars, euros or whatever) onto the card, and you can then use it to withdraw money from ATM machines, or pay for goods in shops while you're abroad. You can even top the card up online or by phone. BUT many come with various fees, either for getting them to start with, topping them up, withdrawing cash from machines or making purchases, so make sure you read the small print before going ahead.

5. Credit cards

• Ease: 8/10
• Cost-effectiveness: 1/10 (unless you have a card designed for travel)
• Overall 4.5/10

You could also just use a regular credit card – a fairly hassle-free way of shopping abroad as you can just turn up and swipe the plastic as normal. Just be sure to pay them off on time (and preferably in full) to avoid stacking up interest or incurring late payment fines. And be careful which card you go for, as spending on one which isn't specifically designed to be used abroad can leave you with god-awful exchange rates, hefty loading fees and huge interest. You can also get hit by fees of about £3 each time you make a withdrawal.

6. Debit cards

• Ease: 10/10
• Cost-effectiveness: 2/10
• Overall: 6/10

It can be very tempting to simply use your debit card as normal when you're abroad. But it's important to bear in mind that most debit cards will incur a cash conversion charge of about 2.75% of the amount withdrawn every time they are used to take money from a foreign ATM.

There may also be a cash withdrawal charge, which is typically around 1.5%-2%, and there's usually a minimum charge of around £1.50-£2, so if you are taking out small amounts of cash often, you could be paying an extra £2 for every £10 you take out. You can also ring up fees for using your card in shops. The bottom line is, make sure you understand all of the charges first, to avoid spending money unexpectedly.

The verdict

• 9/10: 3rd Party Transfers (if you have somewhere to send funds)

• 7.5/10: Pre-paid cards

• 6.5/10: Get cash out before you go

• 6/10: Debit Cards

• 4.5/10: Traveller's Cheques

• 4/10: Credit Cards (unless your card is designed for travel)

By Taavet Hinrikus,Wise Co-Founder.