Making payments

Paying abroad – debit card, credit card or cash?

Withdrawing cash with a credit card abroad can attract high charges. Source: Thinkstock

It's one of those questions that invariably crops up before setting off on a holiday: What's the cheapest way to pay when abroad? As it's not always easy to navigate the maze of exchange rates and charges, has compiled a list of tips to help.

There is no single perfect way to pay when you're travelling. The best solution is usually to have a selection of payment methods to hand, i.e. cash, debit card and credit card, then you can choose the cheapest or most convenient way to pay depending on the situation. You are always advised to change a small quantity of cash before setting off to cover any smaller expenses you may incur on arrival – such as a taxi to the hotel from the airport.

Change money in the destination country where possible

As a rule, you should wait until you arrive at your destination before changing large quantities of money because the exchange rates there are normally lower than in Switzerland. Of course, if you are travelling in the euro zone, it makes sense to organise some euros from your bank before you depart, as it won't usually charge you for the transaction. This way you can avoid charges for withdrawing cash abroad.

Most importantly, you should find out in advance of your trip how much cash you are allowed to take to your destination country and whether this needs to be declared at customs. You can be heavily fined if you don’t follow the required procedure. Also bear in mind that one of the risks of carrying a lot of cash is that it won't be replaced if it is lost or stolen. Credit and debit cards, on the other hand, can be cancelled.

Use your debit card to withdraw cash

In most cases, if you need to withdraw money abroad, it is cheaper to do so with your debit card (Maestro / EC card). Although a cash withdrawal can cost as much as 5 francs, it is still comparatively cheap to do it this way. You should avoid withdrawing cash with your credit card as the charges are higher than with debit cards. Credit card providers commonly charge at least 10 francs per withdrawal, with some taking up to 4 per cent of the amount withdrawn. There is also usually a transaction charge of 0.9 to 2.5 per cent on top, depending on the provider. Going to a bank and withdrawing cash from the counter is not recommended either as the charges are even higher than for withdrawing from a cash machine.

Use your credit card for small amounts

Although you can use a debit card for making non-cash payments, it's not really worth it for amounts less than around 150 francs. The reason for this is that when you pay, let's say, with your Maestro card, there is normally a fixed charge of 1.50 francs, whereas with a credit card the charges are a percentage of the purchase amount. In other words, the higher the amount, the more likely you are to be better off paying with your debit card.

Whether you are making a purchase or withdrawing cash with your card, there is still the question of which currency is the cheapest. If you use the Direct Currency Conversion (DCC) service, you can choose to make your purchase or withdraw money in the currency of the credit card account. On the face of it, this method seems appealing as many people feel more comfortable dealing with their home currency. However, it is always better to choose the local currency – for two reasons. One is that you still be charged for making a foreign payment even if you choose francs. The other is that the DCC often uses exchange rates that are less advantageous for customers than those used for a conversion in Switzerland.

Another option: the Travel Cash card

Another albeit slightly more expensive option for withdrawing cash and making payments abroad is the Travel Cash card from Swiss Bankers. This is a MasterCard onto which you can load a credit amount. The advantage of this card is that it is not linked to any bank account. A cash withdrawal costs 5 francs, 5 euros or 5 US dollars, depending on the card currency. A fee of 1 franc, 1 euro or 1 US dollar is charged for making a purchase from a shop. However, you are charged a fee for loading the card – generally 1.5 per cent of the load amount.

Since there is no single card in Switzerland that offers low fees for both withdrawing cash and making payments abroad, it is best to take both a debit card and credit card with you. This also gives you something to fall back on should you encounter problems withdrawing cash or paying for an item with one of the cards.