Cash or Card Abroad: Which Payment Method Costs Less
The short answer: cards usually cost less, but only if you use the right card
A credit or debit card typically costs you less money than cash when you travel abroad, but the difference depends entirely on which card you use and where you're withdrawing or spending. A card with no foreign transaction fees and no ATM charges will beat cash every time. A card that charges 3 percent per transaction will cost you more than withdrawing cash once and spending it.
The real cost of cash abroad is not the withdrawal itself — it's the exchange rate you get when you convert it. Banks and currency exchanges give you a worse rate than the mid-market rate (the rate banks charge each other). Cards, when they're the right kind, give you that mid-market rate automatically. That difference alone can be 2 to 4 percent on every dollar you spend.
Key Takeaways
- Cards with no foreign transaction fees charge you the mid-market exchange rate, which is 2 to 4 percent better than what you'll get exchanging cash at a bank or airport.
- ATM withdrawals abroad typically cost $2 to $5 per transaction, plus a foreign transaction fee if your card charges one, making multiple withdrawals expensive.
- Exchanging cash before you leave or at an airport costs 3 to 8 percent more than the mid-market rate because the exchange service takes a cut.
- The cheapest approach is one card with no foreign transaction fees, one ATM withdrawal per trip, and spending by card for everything else.
- Prepaid travel cards and currency exchange services almost always cost more than a no-fee credit card, even when they advertise "competitive rates."
How foreign transaction fees add up on cards
Most credit cards and many debit cards charge a foreign transaction fee of 1 to 3 percent every time you use them outside the United States. That fee is added to the exchange rate the card company charges you. If you spend $1,000 on a card with a 2 percent foreign transaction fee, you pay an extra $20 just for using the card abroad.
Some cards — primarily travel rewards cards and cards from online banks — charge zero foreign transaction fees. These cards pass the mid-market exchange rate directly to you, with no markup. The card company makes its money from the merchant (the store or restaurant), not from you. If you have access to one of these cards, using it abroad costs significantly less than any other method.
Debit cards often charge foreign transaction fees even when the credit card from the same bank does not. Check your specific card's terms before you leave. Some banks waive the fee if you maintain a certain balance or have a premium account tier.
ATM withdrawals: the per-transaction cost trap
Withdrawing cash from an ATM abroad costs money in two ways: your bank charges you a fee (usually $2 to $5 per withdrawal), and the ATM operator may charge you a fee as well (often $1 to $3). On top of that, if your card charges a foreign transaction fee, that applies to the withdrawal too.
A single $200 withdrawal could cost you $7 to $10 in fees alone — roughly 3.5 to 5 percent of what you withdrew. If you withdraw cash multiple times during a trip, those fees compound. The strategy that works is to withdraw once, in a larger amount, at an ATM in a major city where you're least likely to face operator fees. ATMs in airports and tourist areas charge more than ATMs inside banks or grocery stores.
Some banks and online financial institutions reimburse ATM fees charged by other banks. If your bank offers this, you only pay the foreign transaction fee (if any) on the withdrawal itself, which is much cheaper. Check your account terms or call before you travel.
Exchanging cash before you leave or at the airport
Exchanging dollars for foreign currency before your trip or at the airport is almost always the most expensive option. Currency exchange services — whether at your bank, at an airport kiosk, or online — buy currency from you at a rate that's 3 to 8 percent worse than the mid-market rate. They do this because they need to make a profit on the transaction and cover their operating costs.
An airport exchange is typically the worst rate you'll find. Airport operators pay high rent and know travelers are in a hurry, so they mark up the rate further. If you must exchange cash, do it at your bank before you leave, not at the airport.
The only scenario where pre-exchanging makes sense is if you're traveling to a country where ATMs are genuinely scarce or unreliable, and you need a safety net of local currency. Even then, exchange only what you think you'll need, and keep the rest on a card.
Prepaid travel cards and currency cards: the marketing trap
Prepaid travel cards and multi-currency cards advertise "competitive exchange rates" and "no hidden fees," but they almost always cost more than a no-fee credit card. Here's why: these cards make money by marking up the exchange rate, charging monthly fees, charging ATM fees, or charging fees to load money onto the card in the first place.
A prepaid card might advertise a 1 percent markup on the exchange rate, which sounds reasonable until you compare it to a credit card with zero foreign transaction fees (which gives you the mid-market rate with no markup at all). The prepaid card also typically charges $2 to $5 per ATM withdrawal, while a no-fee credit card does not.
These cards are marketed to travelers who don't have credit cards or who want to limit their spending abroad. If that's your situation, a prepaid card is better than exchanging cash. But if you have access to a credit card with no foreign transaction fees, that card will cost you less.
Comparing the total cost of each method
| Method | Exchange Rate Markup | Per-Transaction Fees | Total Cost on $1,000 Spent |
|---|---|---|---|
| Credit card, no foreign transaction fee | 0% (mid-market rate) | $0 | $0 |
| Credit card with 2% foreign transaction fee | 2% | $0 | $20 |
| Cash exchanged at bank before trip | 3–5% | $0 | $30–$50 |
| Cash exchanged at airport | 5–8% | $0 | $50–$80 |
| One ATM withdrawal, no foreign transaction fee | 0% | $5–$10 | $5–$10 |
| One ATM withdrawal, 2% foreign transaction fee | 2% | $5–$10 | $25–$30 |
| Prepaid travel card | 1–2% | $2–$5 per ATM | $15–$30 |
The table assumes you spend $1,000 total during your trip. The actual cost depends on how many ATM withdrawals you make, whether you use a card or cash for most purchases, and which specific card or service you use. The key takeaway: a no-fee credit card costs nothing, while every other method costs something.
These numbers shift based on the country you're visiting and the specific banks involved, but the ranking stays the same. A no-fee card is always cheapest, followed by a single ATM withdrawal, followed by pre-exchanged cash, followed by airport exchanges.
What to do if you don't have a no-fee card
If your current card charges foreign transaction fees and you can't get a different card before your trip, your next-cheapest option is to withdraw cash once at an ATM and spend that cash for most of your trip. One $300 to $400 withdrawal costs you $5 to $10 in fees. Spending that cash costs you nothing more. This is cheaper than using a card that charges 2 to 3 percent on every transaction.
If you're traveling to a country where card use is uncommon or where small vendors don't accept cards, cash is your only option anyway. In that case, withdraw once in a major city and budget for the ATM fees as part of your travel cost.
Some travelers use a combination: withdraw a modest amount of cash for small purchases and tipping, and use a card (even one with fees) for larger purchases like hotels and restaurants. This reduces the number of ATM withdrawals you make, which saves on per-transaction fees. The math works out if you're making three or more withdrawals — one withdrawal plus card use is cheaper than multiple ATM trips.
Frequently Asked Questions
Is it cheaper to exchange money before I leave or withdraw at an ATM abroad?
Withdrawing at an ATM abroad is cheaper. An ATM withdrawal costs $5 to $10 in fees but gives you the mid-market exchange rate. Exchanging cash at your bank costs 3 to 5 percent of the amount you exchange, and at an airport costs 5 to 8 percent. On $500, the bank exchange costs $15 to $25, while an ATM withdrawal costs $5 to $10.
Do I need to notify my bank before I travel?
Many banks flag foreign transactions as fraud if they're not expecting them, which can block your card. Calling your bank before you leave is the safest approach. Some banks let you set travel dates in their app or online account, which is faster than calling. Check your bank's website for the option.
What if my card gets stolen or lost abroad?
Call your card issuer immediately — the number is on the back of your card or in your online account. They can cancel the card and issue a replacement. In the meantime, if you have a backup card, use that. If you have cash, use that. Most card companies cover fraudulent charges made after you report the card lost, so you're not liable for theft.
Are there cards that don't charge foreign transaction fees?
Yes. Many travel rewards credit cards, some online bank debit cards, and a few premium checking accounts offer zero foreign transaction fees. You can search for "no foreign transaction fee credit card" to find current options. Rewards cards often require good credit to get approved, but the savings abroad can offset the annual fee if you travel regularly.
Should I carry both cash and a card?
Yes. Carry enough cash to cover a day or two of expenses as a backup if your card is lost, stolen, or doesn't work. This also gives you options if a vendor doesn't accept cards. But don't carry large amounts of cash — it's riskier to lose and costs more in exchange fees if you had to buy it before the trip.