When traveling, it is recommended to have a small amount of cash in case of emergencies, but it is generally best to pay with a card as it is safer, more convenient, and cheaper than obtaining foreign currency in cash.
Most cards from any financial institution are a better alternative to cash payments. However, it is important to know that each institution applies different fees when using international ATMs, performing currency conversions, and making payments at foreign merchants.
Regardless of whether you are a customer of a good bank that offers competitive banking fees, it is advisable to obtain a card from an electronic money management entity that provides specific travel cards. These types of cards charge lower fees and offer very advantageous exchange rates, resulting in significant savings compared to traditional bank cards.
To make it easier for you to find the best travel card (there are dozens available on the market), we have conducted an updated study for 2024 where we extensively compare all the travel cards currently available, aiming to help you easily find the best option.
Regarding obtaining a small amount of cash in the currency of the country you are visiting, the cheapest option is to withdraw a small amount of money from an ATM in the visited country using one of the aforementioned travel cards.
Alternatively, the most practical option to obtain foreign currency in cash is to visit the bank where you hold an account in your country and exchange currency. This alternative may be slightly more expensive, but for small amounts, the cost difference is not substantial.
Advantages of paying with a card when abroad:
- Security: If you lose or get robbed of cash, it’s almost impossible to recover it. However, if you lose your card, you can easily block it from your mobile device.
- Convenience: Forget about currency exchange, carrying cash, dealing with different coins and bills from various countries and denominations. Simply pay with your card using your home currency, and it will be electronically converted to the currency you need to pay in.
- Save on fees and currency exchange costs: When using a good travel card abroad or withdrawing foreign currency from international ATMs, you will only be charged a currency conversion fee for the amount you need to pay, applying very favorable exchange rates, practically identical to official rates. Even with conventional bank cards, despite slightly higher costs, you would still save compared to physically exchanging currencies.
- Credit: Establishments like hotels and car rental agencies often require a deposit, which can only be charged to a credit card, not cash.
- Acceptance: You can use cards for payment in almost any modern establishment worldwide.
- Transaction record: You can view a detailed list of your transactions in your online banking, allowing you to have full control over your expenses.
Disadvantages of paying with a card when traveling:
- Deterioration: Your card may deteriorate and become unusable. The magnetic stripe is often the most vulnerable part, and in certain countries with limited technological advancements, you may encounter issues since chip or contactless payment methods may not be available yet.
- Fraudulent transactions: As a tourist abroad, you may be targeted for card fraud, as it is evident that you have money on your card, and reporting or taking action outside of your home country can be challenging.
- Errors in transactions: Similar to anywhere else, paying with a card can involve errors, such as duplicated transactions, incorrect amounts, incorrect payment orders, etc. The difference is that solving these problems can be more complicated when abroad.
- Non-acceptance at markets or exotic locations: It’s possible that in markets or certain regions of developing countries without banking infrastructure, cash may be the only accepted payment method.
Recommendations when traveling with a card:
When traveling abroad with the intention of using your card for payments, it is recommended to have:
- Debit card for travel: Use this card for all your payments and cash withdrawals from ATMs, paying minimal fees and benefiting from favorable exchange rates. Always select the option to pay in the local currency of the country you are visiting, as the card issuer will handle the currency conversion instead of the merchant’s bank.
- Credit card: This is useful for making reservations and paying deposits at establishments like hotels or car rental agencies.
- Virtual card on your mobile device: This allows you to make payments in case of theft, loss, or damage to your physical cards.
It’s important to install the online banking app(s) for your card issuer(s) to have complete control over your cards, such as viewing transactions, blocking them in case of theft, setting spending limits, requesting installment payments for specific transactions, and reporting erroneous or fraudulent operations. Additionally, have the contact information for your bank or financial provider in case you encounter any issues with your cards outside of your home country, such as automatic blocks in certain countries, non-modifiable maximum limits via mobile app, the need to block a card when you lose your mobile device, etc.
Lastly, despite card payments being the most cost-effective option, it’s still advisable to carry a small amount of cash in the local currency of the country you are visiting for emergencies or urgent situations.
Advantages of paying in cash while traveling:
- Acceptance: As long as you have the local currency of the country you are visiting, you can pay without any issues anywhere. You won’t have to worry about system failures, card blocks, or similar problems—cash always works.
- Tipping: In many countries, it is customary to give tips for certain services. Not having cash on hand may give the impression of being stingy or impolite.
- Small purchases: For certain small purchases, it is often more convenient to pay in cash quickly rather than going through the process of card payment, entering the amount on the POS terminal, presenting your card, entering the PIN, and receiving the receipt.
- Souvenirs: Collecting small denomination bills from the countries you visit can be a great tourist memento. Each country’s banknotes are interesting and often contain cultural elements.
Disadvantages of paying in cash abroad:
- More expensive: Obtaining physical cash from intermediaries is more costly than simply using a card and allowing for instant currency conversion.
- Robbery and theft: If you become a victim of theft or pickpocketing, you will lose the cash without much hope of recovery.
- Non-acceptance for deposits: For certain transactions such as car rentals, many companies only accept credit cards for deposit payments.
- Confusion: Using bills and coins from different currencies can lead to confusion, and you may be at risk of being cheated when paying with them and receiving change.
- Cash transport limits: If you want to carry a large amount of cash, be aware that there are usually limits on the amount of cash an individual can carry.
- Future changes to banknotes: Monetary authorities around the world eventually change their official currency or update current banknotes. Therefore, if you accumulate foreign currencies, be aware that over the years, those banknotes are likely to become obsolete and it may be challenging to exchange them outside their country of origin.
- Value depreciation: In countries with high inflation, cash loses its value over time. If you accumulate cash in unstable or weak currencies, the value of that amount may diminish over time.
Recommendations for paying in cash when traveling:
When traveling abroad with cash, it’s important not to carry a large amount, as paying with a card is generally more economical. It is advisable to carry only a small amount in case you encounter situations where card payments are not possible or for emergencies.
Additionally, remember that the most cost-effective way to obtain local currency is by withdrawing cash from ATMs using a travel card, as mentioned earlier.
Before leaving your country, make sure you are aware of the local currency in your destination country, the official exchange rate with your home currency (to calculate conversions and understand the value of items), and the different denominations of bills and coins (avoid carrying large bills that may not be accepted for small payments).
Lastly, even if you carry a small amount of cash, it’s recommended to distribute it among different pockets or among multiple individuals if you’re traveling with others. This way, in the event of theft, you will only lose a small portion of your money.