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What Kind of Travel Money Should I Bring to the UK?

A Look at the Pros and Cons for Convenience, Value and Spending Power

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I'm planning a trip to the UK this year and I'm wondering whether I should buy travelers' checks, try a prepaid currency card or just use my credit cards. What kind of travel money is best to bring to the United Kingdom?

Years ago, before 9/11, money laundering and the explosive growth of credit card fraud, deciding whether to bring foreign currency, credit cards, or travelers' checks was relatively straightforward. Not any more. One reason is that banks and credit card companies in the USA have resisted switching to the chip-and-pin debit and credit cards that have been the European standard for at least 15 years - clinging to the mag stripe-signature cards instead. Another reason is that banks and shops are just more cautious these days and shop clerks are wary of accepting cards and other forms of exchange they aren't familiar with.

As soon as you start planning your trip, consider the pros and cons of the various kinds of currency "instruments" you might take along. You'll want to leave yourself enough time to research your bank and credit card company's policies and charges and to open up a new account if you need to. Meanwhile, here are the pros and cons of various options.

Travelers' Checks

Travelers' checks were once the gold standard when it came to carrying travel money. And perhaps, in some parts of the world they may still be a safe option, but they are currently the most expensive and most inconvenient option for the UK.
The Pros:

  • They are very secure - As long as you keep a record of the check numbers (separate from the checks themselves), and as long as you keep track of the emergency number to call in the country you are visiting, you can get lost or stolen checks replaced quickly, at no extra cost.
  • They are available in several currencies including dollars, Euros and pounds sterling.
The Cons:
  • They are expensive, possibly the most expensive way to take money abroad in fact. First off, you will usually be charged a fee of one per cent of the total value of the cheques you buy. If you buy them in a foreign currency - in other words you spend dollars to buy travelers checks in pounds sterling - the seller's retail exchange rate will apply and you may also pay a commission for the currency conversion. If you buy them in dollars, planning to exchange them for local currency when you arrive, you will still be stuck with accepting a retail exchange rate (usually much less advantageous than the interbank rate for the day) and probably a foreigh currency commission too.
  • They are very inconvenient. In the UK, with the exception of tourist magnets like Harrods, and very expensive hotels, almost none of the shops, restaurants and hotels accept them. In fact, very few stores in the UK except any kind of check at all. So you will have to seek out bureau de change, banks and post offices - during weekday working hours, to cash them. Bureau de change outlets, the European name for commercial currency exchanges, are profit making businesses and usually offer the worst exchange rates.

Credit and Debit Cards

By far the most convenient and economical way to pay for things and get "walking around" money in the UK is to use either credit or debit cards from one of the major international card companies. There are, of course, some issues worth taking into consideration.
The Pros
  • They're the cheapest - The credit card company applies the wholesale/interbank exchange rate in effect when your transaction is processed. The rate will go up and down but it will always be a commercial rate, available to banks and large organizations and will be better than you can find through retail currency exchange methods. Most card companies do not apply additional transaction fees on purchases (though charges usually apply for buying cash), so, provided you pay your credit card bills before interest accrues and have enough money in your debit account to cover your spending, this is the most economical way to pay.
  • They're widely accepted - You can pay for just about anything with a debit card in the UK, from a carton of milk and the day's newspapers or beer in a pub, to large expensive goods. In the UK, people can even pay their taxes and energy bills with a debit card.
  • ATMs are everywhere. Most village high streets will have a selection of automated teller machines. They're available at petrol (gas) stations, in cinemas, at banks and in some shops. This makes obtaining cash at any hour of day or night very easy.
The Cons
  • Some cards are not recognized or widely accepted. You will have difficulty using Diners Club and Discover cards. American Express cards are sometimes refused. Stick with the big two - VISA and MasterCharge - and you shouldn't have any problems.
  • Some merchants may require a minimum purchase to accept a credit card. This is especially true in small, local Mom and Pop stores.
  • Bank charges may apply. Most cash machines in the UK do not apply an extra charge or commission for obtaining cash but your own bank or card company probably will. It's worth shopping around for the lowest currency transaction charge because this varies from card to card and between issuing banks. You might be charged anywhere from $1.50 to $3.00 or more per foreign currency cash transation.
  • A small number of cash machines do assess a charge. Try to stick to machines that are associated with the UK's big banks, with building societies (like savings banks) or with the leading shops (Harrods, Marks & Spencer). Cash machines available in small convenience stores and at motorway rest stops are part of a commercial network that adds a charge - a minimum of about £1.50 but sometimes a percentage of your transaction. Try to avoid using these machines except in an emergency.
The Chip-and-Pin Issue
If you are visiting the UK from the USA, you may be worried about your credit or debit cards being accepted. That's because all UK cards have an embedded microchip and a 4-digit pin number. American cards, for the most part, have a magnetic stripe and require your signature.

Nowadays, the card reading machines used in shops, banks and post offices, have a magnetic stripe reader for you to swipe your card on the top or side of the device so, in general, you should not have a problem using your card where a person is handling your transaction. Your card may still be rejected by ticket machines in Tube or train stations and by automated petrol pumps - so try to conduct these transactions where there is a human cashier available. If you run into difficulty outside the bigger cities - where shop clerks may not be familiar with magnetic stripe cards - they can always make a call for authorization so be sure to point that out.

To avoid hassles:

  • Ask your bank to give you a 4-digit pin number for each of your cards if you don't already have them. That way you can swipe your card or use it in an ATM, and then complete the authorization with a pin number.
  • Try to get your hands on a chip-and-pin card. A few American banks are experimenting with issuing them to certain categories of customers and VISA announced in 2011 that it would begin supporting chip-and-pin in the USA, so it's worth asking around.

Prepaid Currency Cards

One way around the chip-and-pin issue is to buy yourself a prepaid currency card, such as the Travelex Cash Passport or the MoneyCorp Explorer Card. These are cards you prepay in either your own currency or the currency you want to spend. Some, like the MoneyCorp Explorer can be charged up with several currencies at once. The cards are associated with one of the major international card organizations - usually VISA or MasterCharge, are embedded with chip-and-pin technology and can be used wherever those credit cards are normally accepted.
The Pros

  • An easy way in to chip-and-pin
  • Easier to control your spending. You charge the card with exactly what you want to spend and then use it up like cash.
  • Security is assured as long as you protect your pin number.
The Cons
  • Up front purchase price and higher than average ATM cash fees can add to costs
  • Some can only be charged up with additional funds in person in a branch of the business that sold it to you, in your own country.
  • Hidden charges - if you leave a balance on the card, planning to use it for another trip abroad or other special purchases, you may find that balance nibbled away by monthly "inactivity" charges. Read the fine print.

And one last warning about prepaid cards. Whatever you do, DO NOT USE these cards to guarantee your hotel or rental car bill or to buy petrol from automated pumps. In these situations, an amount - which can be £200 or £300 - will be put on hold to guarantee that you will pay your bill. The problem is, it can take as long as 30 days for those funds to be released. So, you can find yourself unable to use fund you know you have for the duration of your trip. Use your credit card for the guarantees, then settle the bills with the prepaid card.

Cash

Then, of course, there's always good old cash. You'll want to have some local currency in your wallet for tips, cab and bus fares and small purchases. How much you carry depends on your own spending habits and confidence in carrying cash. As a rule of thumb, plan on carrying about as much in pounds sterling as you might carry in your own currency when at home.

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