Should you use a credit card to withdraw cash while travelling?

Feb 1, 2020

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We are continuing to delve into the quirks of using cash with travelling here at TPG U.K. There are plenty of options for using cash abroad — you can take GBP with you and exchange it at your destination, exchange cash before you leave or withdraw cash from cash machines while abroad. With so many different options, read our guide to make an informed decision.

Today, we are looking at a specific cash while travelling conundrum — using your credit card at cash machines abroad. If you have a card that earn rewards and you find yourself somewhere that accepts cash only but there’s a cash machine nearby, problem solved, right? Unfortunately not.

In short, you should avoid doing this. Here’s why.

Related: Choosing between local currency or home currency when using your cards abroad

Firstly, card issuers may charge you a cash advance fee even if the cash is in GBP, in the UK and even if the cash machine operator does not charge any fees of its own. The fee charged is usually around 3%.

Secondly, most U.K. credit cards will charge a foreign currency conversion fee for withdrawing money in a currency other than GBP if you are using a cash machine abroad. This is also likely to be around 3%. This means if you are hit with both of these fees, a £100 equivalent cash advance could already rack up £6 in fees — and it doesn’t end there.

Thirdly, a foreign cash machine operator may charge you a fee for using their cash machine, even though you may be used to fee-free cash machines in the U.K. This amount can be substantial — often £5 or more per transaction.

(Photo by Josh Gribben/The Points Guy)

Fourth, interest will usually accrue immediately on the cash advance on your credit card, without the usual interest-free period that can be up to 56 days each statement period. If you are making the cash advance at the start of your statement period, this £100 example will become even more expensive.

Fifth, you will not earn any points or miles on cash advance, unlike purchases. If you used that credit card for a purchase directly such as paying a restaurant bill or purchasing groceries at a supermarket, you would earn points or miles on a points- or miles-earning card. However, if you instead use the card to withdraw cash and then use that cash to pay for the same sorts of purchases, you would not earn the points as the card issuer only sees the use of the card was for cash, not purchases, even though you then use that cash to make a purchase.

Bottom line

Convenience is about the only benefit in using a credit card to withdraw cash while travelling, but you’ll pay dearly for this convenience. There are plenty of downsides to doing so, most notably the sizable fees likely to be incurred and the valuable rewards missed. If you need to use cash while travelling, try and use a no-fee debit card, or else consider taking cash with you to exchange at your destination.

Related: The Battle of the Travel Debit Cards: Revolut vs. Monzo vs. Starling vs. N26 vs. Curve

Featured image by Gettys Images

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