Brandon Lee
Foreign transaction fees charged by banks can spoil the fun of holidays and business trips and drain your travel budget. These fees are applied when converting currencies, and even when you have the foreign currency, you might not be able to use it as many countries are gradually becoming cashless. Luckily, there are alternative providers in the UK that offer low-fee international spending with additional benefits like no-markup exchange rates.
| Characteristics | Values |
|---|---|
| Banks with no foreign transaction fees | Starling Bank, Wise, Credit unions, Schwab, Capital One |
| Banks with foreign transaction fees | Barclays, Bank of America, U.S. Bank |
| Alternatives to banks for currency exchange | Wise, Revolut, Credit cards |
| Ways to save on currency exchange fees | Use cards with no foreign transaction fees, withdraw larger amounts, choose to be charged in local currency |
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What You'll Learn
Foreign transaction fees
When you use your debit or credit card in another country, your bank may charge a foreign transaction fee for each purchase or cash withdrawal. These fees can vary depending on the bank and the type of account you have. Some banks may charge a flat fee for each transaction, while others may charge a percentage of the transaction amount. There are also some banks that do not charge any foreign transaction fees at all.
To avoid paying foreign transaction fees, it's a good idea to do some research before you travel. Check with your bank to find out their policy on foreign transactions and consider opening an account with a bank that doesn't charge these fees. Some banks that are often mentioned as having no foreign transaction fees include Wise, Starling Bank, and Schwab.
In addition to bank accounts, certain credit cards are designed with travellers in mind and may offer no foreign transaction fees as a benefit. Using a credit card that doesn't charge foreign transaction fees can be a convenient way to pay for purchases and withdraw cash while abroad without incurring additional costs. Just be sure to read the fine print and understand any other fees or charges that may apply.
Another way to minimise foreign transaction fees is to use ATMs wisely. Withdrawing a larger amount of cash at once may result in fewer transactions and lower fees overall. Additionally, using ATMs from major banks that are widely recognised, such as HSBC, can help avoid unnecessary charges.
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Credit cards with no foreign exchange fees
Most credit and debit cards in the UK will charge foreign transaction fees (officially called
Barclaycard Rewards Card
The Barclaycard Rewards Card has no annual fees and no foreign transaction fees, including for cash withdrawals. It uses Visa's exchange rate to convert currency and has a representative APR of 28.9% (variable). You'll get 0.25% cashback on all eligible spending. To apply, you'll need to be over 21, have an income of at least £20,000 a year, and have a good credit history.
Halifax Clarity Credit Card
The Halifax Clarity card is a straightforward travel credit card with no annual fees and no foreign transaction fees. It offers purchase protection of up to £100 on single purchases. To apply, you'll need to be a UK resident over 18 with a job and a regular income.
Santander All in One Credit Card
The Santander All in One Credit Card has no foreign transaction fees for purchases. It charges a 3% fee (minimum £3) for ATM withdrawals, and interest is likely to start accruing immediately. It gives you 0.5% cashback on all spending, up to a maximum of £10 a month. There is a £3 monthly fee. The card has a representative APR of 29.8% (variable) and uses either the Visa or Mastercard exchange rate.
NatWest Travel Reward Credit Card
The NatWest Travel Reward Credit Card charges no foreign transaction fees on spending, but it does have a 3% (minimum £3) fee for ATM withdrawals. Cash-based transactions will start accruing interest right away.
Currensea Card
The Currensea Card is linked to your existing current account via Open Banking. It charges your linked current account in pounds, avoiding non-sterling transaction fees and ATM fees. On the free 'essential plan', there's a flat 0.5% exchange fee on the interbank/Mastercard exchange rates it uses.
Additionally, the First Direct Mastercard debit card is a good option if you're willing to switch your current account. It's fee-free and offers switchers £175 free cash.
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ATM fees
When it comes to ATM fees for currency exchange in the UK, there are a few things to keep in mind. Firstly, it's important to distinguish between bank ATMs and non-bank ATMs. The majority of bank ATMs in the UK do not charge any access fees per transaction to foreign cardholders, whereas non-bank ATMs (operated independently) typically charge a fee of £1.99 to £3.95 per transaction. Therefore, it is advisable to use bank ATMs to avoid these fees.
To find fee-free ATMs in the UK, you can use the ATM Fee Saver mobile app, which provides information on ATM fees and withdrawal limits for foreign cardholders. Additionally, it is recommended to use ATMs at major banks, as smaller banks and independently owned ATMs may have a higher risk of surcharges.
When using an ATM for currency exchange, be cautious of dynamic currency conversion (DCC). This is when the ATM or merchant offers to convert the transaction into your home currency. While this may seem convenient, the exchange rate may include significant hidden fees. It is usually more cost-effective to choose to pay in the local currency, as your bank or card network's exchange rate may be more favourable.
To minimise ATM fees, it is advisable to carry multiple cards, including a credit card with low or no foreign exchange fees. Using a credit card for purchases can often provide better rates than withdrawing cash from ATMs, especially if the credit card has no foreign transaction fees. Additionally, consider using a low-cost ATM card from your bank or a non-bank alternative like a Wise Account, which offers low-cost debit cards specifically designed for international use.
Lastly, be mindful of withdrawal limits and transaction fees. Some ATMs in the UK have maximum withdrawal limits per transaction, which can vary from £250 to £700. If you need to withdraw a large amount, you may need to make multiple transactions. Additionally, some banks charge higher fees for international withdrawals, which can be a flat rate or a percentage of the total withdrawal amount. Always review your bank's policies on international ATM usage to understand the associated fees.
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Cashless countries
In a cashless society, financial transactions are conducted with credit cards, debit cards, mobile payment apps, or digital currencies instead of physical cash. While a completely cashless society may not be enforced by governments, many countries are increasingly adopting cashless systems. Here are some examples of countries that are moving towards becoming cashless societies:
Sweden
Sweden is leading the global shift towards a cashless economy and is on track to become the first fully cashless country by the end of 2025. Currently, less than 5% of transactions in Sweden involve physical cash, and most banks no longer handle it. Sweden's high rate of card payments makes it two and a half to four times higher than the European average.
Norway
Norway is another country at the forefront of the transition to a cashless society, with a high volume of card payments per capita.
South Korea
South Korea is also among the countries leading the change to a cashless economy, with mobile payment apps like Samsung Pay and Naver Pay being widely used.
Denmark
Denmark has been largely cashless for over a decade, with most transactions being conducted digitally or through card payments.
Finland
Finland is moving towards a cashless society, with some places no longer accepting cash at all.
Brazil
Brazil is one of the countries with a high number of cashless transactions, with mobile payment apps like Boleto Bancário making up 25% of the country's total payments.
While the trend towards cashless societies offers benefits such as convenience and reduced crime rates, there are also concerns about data mining, surveillance, and the potential exclusion of populations that rely on cash, such as the elderly, poor, and undocumented immigrants.
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Alternatives to banks for currency exchange
Banks are one option for currency exchange, but they tend to charge high fees and currency markups. With that in mind, here are some alternatives to using banks for currency exchange in the UK:
Credit Cards
A credit card with no foreign exchange fees can be used as the primary method of payment when travelling. Credit cards are widely accepted and offer good exchange rates.
Debit Cards
Some debit card providers, such as credit unions, offer competitive exchange rates and don't charge foreign transaction or ATM fees.
Multi-Currency Accounts
Specialist multi-currency accounts can provide better exchange rates and lower fees than traditional banks. These accounts also allow users to make and receive transfers in multiple currencies. Examples of providers offering multi-currency accounts include Wise, Revolut, and Starling Bank.
Currency Exchange Companies
Physical currency exchange companies, such as Travelex, Eurochange, and Currency Online Group, often offer better exchange rates than high street banks.
Supermarket Banks
Some supermarket banks, such as Sainsbury's Bank, don't charge commission fees for buying currency.
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Frequently asked questions
It depends on the bank and the type of account you have. Some banks, like Barclays, offer currency exchange services for free to their customers. Other banks may charge a flat fee or a percentage of the transaction amount.
You can avoid currency exchange fees by using a credit card with no foreign exchange fees or by using a service like Wise, which offers low-fee international spending and no-markup exchange rates.
A foreign transaction fee is a charge incurred when you make a purchase or withdraw cash in a foreign currency. This fee is typically a percentage of the transaction amount, but it can also be a flat fee.
Yes, there are alternative providers in the UK that offer low-fee international spending and no-markup exchange rates. These include companies like Wise and Revolut, which offer similar services to a bank account.
The cheapest way to exchange currency in the UK is to use a service like Wise, which offers low, transparent fees and no-markup exchange rates. You can also exchange currency at a bank or a currency exchange company, but these options may be more expensive.
