As a UK resident who travels abroad a lot for a living, I’m always on the look-out for ways to optimise foreign transactions using my UK/GBP bank accounts — especially after the day in 2016 when Brexit wiped out 15% of my overseas travel budget overnight.
In the realm of things I can control, I look for ways to minimise the fees associated with debit and credit card transactions for three types of transaction: cash withdrawals from overseas ATMs, point-of-sale card purchases abroad, and online purchases in foreign currencies or with foreign merchants.
Most banks will penalise (i.e. profit from) such actions through complex matrices of charges, often combining multiple fees for a single operation, not to mention poor exchange rates on top. Such charges quickly add up, and if you’re not wise to them, you might find anything from 2% to 5% or more of your hard-earned is leaking away.
Fee-free UK current accounts for overseas cash withdrawals and debit card transactions abroad have been hard to come by recently. Metro Bank was formerly this world traveller’s bank of choice in this regard (Nationwide before that), but they recently scaled down their global fee-free offer to Europe alone, making it far less attractive for the world traveller, though their fees are still very competitive.
Thankfully, a new contender has arrived in the form of Starling Bank, a mobile-only ‘challenger’ bank offering its personal current account customers zero-fee withdrawals and purchases in any currency anywhere in the world.
Especially for independent travellers in remote regions who rely heavily on cash, this is as good as it gets.
Yes, I was a bit slow on the uptake — it’s been several months since the offer was launched (what can I say — I was out in the mountains!)
But I’m also not one to recommend something I haven’t tried. So I opened an account with Starling with the intention of using the account to finance my current travels in South East Asia and reporting back on my experience.
The sign-up process involved installing the Android app (iOS also available), filling in my usual basic personal details, receiving an SMS confirmation code, and ta-da: my account was open. It couldn’t have been simpler. The MasterCard debit card arrived in the post a couple of days later, I transferred over a hundred quid from my regular current account for starters, and then, after a few test purchases, the rest of my funds for this trip. I’ve been using it on the road ever since.
So what’s the difference from a regular account and card? Well, the user-oriented, mobile-only concept is interesting and plays out in a couple of different ways. The first is in how your account usage is communicated to you. The app behaves more like a personal finance assistant than an account ledger, including details of the retailer, location, date and time, as well as the amount and the equivalent in GBP if applicable, and even a guess at the category of expense — much more accessible than a cryptic line on a bank statement. This information is also presented as quick and easy visuals of spending over time. The ‘real-time’ notification claim holds true: usually there’s a buzz in my pocket even before the cashier has handed me the receipt or the purchase confirmation page has finished loading.
The second break from the norm is that there’s no branch to visit or website to log into — it’s just an app. Online bank accounts are nothing new, of course (see Triodos, Egg, etc), and behind the scenes there’s a fully fledged FSA-certified banking operation with the UK government underwriting your deposits, as well as MasterCard protecting you from card fraud. I still have an account number and sort code if I need it, and can thereby use the account in a more traditional way if I wish. In other words, the underlying mechanics are the same, but fine-tuned for a much more user-friendly means of interaction.
There are a few novel features I haven’t tried, including the ability to ‘ringfence’ certain amounts of money without having to open a new account. This could be useful to the traveller for, say, monthly budgeting, reserving emergency funds, or protecting a particular sum for a planned purchase in the future, such as a long-haul flight ticket.
Some will dislike the perceived risk of having your bank account in your pocket, just as some refuse to make contactless payments or put their card details into a secure website. I can’t say I share these concerns: with the app only accessible via its own PIN code or a fingerprint scan, and the ability to instantly disable my card in case of loss or theft, my feeling on balance is that this gives me more control over account security than the traditional arrangement (i.e. having to find a WiFi hotspot to look up my bank’s international emergency hotline before calling them breathlessly over Skype to cancel my card).
Having said all that, I did choose to come first to one of the most notorious countries in the world for local ATM withdrawal fees (Thailand), being slapped for about £5 per transaction, which of course neither Starling nor any other UK bank have any control. But at least the lack of fees at my own bank’s end took the sting out of it — and paying for most of my accommodation in Thai Baht (via the Agoda app, in case you’re interested) further proved the point.
So Starling is my new go-to travel account. It isn’t a magic bullet: I still carry a Visa debit card for regions where MasterCard coverage is incomplete (again, Thailand is one such place), and I still stash USD and EUR cash about my person and luggage as backup. But I can see no reason not to move all my routine travel spending over to Starling.
Incidentally — and some smart reader may have the answer to this — I’m wondering what technical hurdle prevents payments from being linked directly to information about the purchase. Why couldn’t a grocery store transaction also include the list of items I bought, for example, or a flight ticket purchase include the itinerary? I currently use an app called Toshl for this, entering the details manually, but if fintech could bridge that gap, it would put a very clever real-time financial advisor in my pocket.
These offers rarely last long — a couple of years at most, in my experience — so if it piques your interest, I’d suggest making the most of it while you can. Qualifying UK residents can sign up for a free account here.
The links above contain a unique referral code which enables you to skip the waiting time for an account. I don’t get anything for it except an extra illuminated heart on my profile page — aw, how cute!
(Disclaimer: I am not a qualified financial advisor. This is an independent report about my personal experience with Starling Bank, with whom I have no affiliation, and is published for information purposes only.)
9 replies on “Stop Bleeding Away Your Travel Money Via Overseas Card Transaction Fees (UK Only)”
Nice one, I’m going to sign up!
I used to work in a shop and the reason that an itemized bill doesn’t appear on bank statements, is that the payment system and the cashier system run on two different platforms. The “itemization” lets say, occurs on the till, and the transaction is merely over the payment line (which is not only charged per transaction, but usually rented too). Merging of the 2 systems just isn’t practical (yet), mainly because it’s a little difficult (and more expensive, with no benefit to the retailer) to get the till to talk to the card system in such a way.
It wouldn’t surprise me though if this kind of thing happened in the near future. However, like the elusive T said, I wouldn’t want it.
I also wouldn’t necessarily want banks to get the details of what I bought. But it would nonetheless be useful to me to have both sets of information in one place. Given it can be done after the fact by connecting personal finance apps to bank feeds and uploading photos of the receipts, and that you can now make card payments by proxy using the same device running the app (see Apple Pay / Google Pay), it seems like a technology hurdle rather than anything else, and one that will probably be broken down sooner
Since I published this article, someone flagged up that ‘item-level digital receipts’ have already been implemented, though it only works at one participating retailer in the UK right now. A sign of things to come, no doubt.
Yeah, all purchase details submitted to MasterCard for our convenience, that’s awesome. Imagine what kind of detailed profiles of everyone’s lifes we could have at one single place (or two, with Visa), readily accessible by governments to protect us from ourselves before we even know we’d become a threat. And so much more.
Also card payments mean 0.3% (EU) to 3% of every purchase go to a huge global company for the convenience (and some to the banks). That’s crazy — like a global tax, just not for the global good.
Well, I very much prefer the tiny inconvenience of cash payments. Unless online where it’s not an option. Offline, it is. At least today.
This article is primarily about avoiding fees when withdrawing cash abroad. Obviously retailers decide for themselves whether the fee to accept card payments is worth it to their business.
Hi Tom, this was meant as a response to the part about ‘itemized transactions’. While it sounds neat, I believe it’s a dangerous wish …
Ah, I see… depends on how it’s implemented, I suppose. It need not necessarily involve disclosing personal information to card issuers or banks. There are already apps you can photograph your paper receipts with and they’ll match them with your transactions, doing all of this privately. An automated version would ideally just remove that one additional step without compromising privacy…
Nice find. I have been an avid fan of Monzo, wich is very similar until they recently decided to back out of the fee-free foreign cash withdrawals, as you say – cash is king for toures. So will happily sign up with your token, Thanks!
Also, was reading through the FAQ (always intrigued as to how such products are funded (no mention)) and they have a marketplace with extra features… one of which is Flux – https://www.tryflux.com which – looks just like the itemised receipt idea you foresaw 😉
Hi Tom, I’ve been using Starling for about 12 months both in Europe and the UK, never found any issue with it at all, I really like the fact you get a running balance – providing you have wifi / data enabled on mobile phone, or the next time you do, makes looking after the budget a lot easier.
Good to hear from someone who’s been using it longer than I have!