Travel abroad is expensive enough without hidden bank fees. In the past, when people went overseas, they’d either ensure they had enough local currency with them, purchase travelers’ checks from their bank in advance, or have a credit or debit card handy.
Today, none of these options is the most attractive for savvy tourists. Instead, fintech-provided debit cards and digital wallets are gaining traction as the preferred ways to pay.
Why is the financial world moving in this direction?
It’s All About the Fees
The first thing to consider when deciding how to spend money while abroad is what fees you’ll pay per transaction with the payment method you’ve chosen.
ATM fees are among the most expensive charges in the banking system, even more so abroad. The other fees to be wary of are international transaction fees and the exchange rate applied. The following table outlines what to expect with each payment method. These figures apply only to transactions made outside the country of origin.
| Payment Method | ATM Fee | Foreign Transaction Fee | Exchange Rate |
| Credit card | 2.5% of the amount, plus a flat fee determined by the bank being used | 1% to 3% of the transaction amount | Close to the wholesale rate with a small markup |
| Debit card | 1.5% to 3% of the amount, plus a flat fee determined by the bank being used | 2% to 3% of the transaction amount | Determined by Mastercard/Visa and not as favorable as credit cards |
| Digital Wallet | Card issuer fee + ATM operator fee, anywhere from $1 to $5 per transaction | Generally, no fees | Mid-market rate, best you can find online |
| Wise | First 2 free, then $1.50 + 2% per withdrawal | 0.35% on currency conversions for major currencies | Mid-market rate, best you can find online |
| Revolut | Free up to plan limit ($200–$2,000); 2% beyond limit | Free on weekdays within monthly limits; 1% fee on weekends | Revolut sets its own exchange rates, but they are close to mid-market |
| PayPal | $2.50 per withdrawal | 1% on purchases | Uses Mastercard’s exchange rate plus 3% markup |
As you can see, the fees fluctuate considerably, with Wise and Revolut’s debit card products being the most cost-effective. PayPal and Mastercard/Visa-branded debit cards (connected to your local bank) charge the most in fees.
Why Fintechs Rule for Overseas Spending
According to Coinlaw, Wise and Revolut collectively control 25% of the cross-border payment market. Their debit card products enable customers to use ATMs and make digital purchases anywhere that Visa or Mastercard is accepted, just with considerably lower fees.
Fintech Limitations
While Wise and Revolut are the most attractive options for spending while traveling, not every fintech product is.
The first example is PayPal. It offers a debit card to US customers only, and while it’s very effective domestically, it isn’t while traveling. The flat $2.50 fee per ATM withdrawal adds up. Combine that with one of the most unattractive exchange rates available, and you’re spending more than you should every time you use it.
Here’s an example of why some domestic payment systems don’t translate abroad. In Canada, Interac is the market leader in ATM and online transactions, and its ubiquitous presence can even be found in newer ventures like Interac online casinos. Domestically, it works. Unfortunately, abroad, debit cards that support Interac can only be used to withdraw cash from ATMs (at a fee of around $5 per transaction) as there are no international merchants that accept it for payments (yet).
The Future is Digital Wallets
As the world is moving towards being a cashless society, ATM fees will no longer be a contributing factor in choosing a payment method. Instead, ease of use, low foreign exchange fees, and merchant acceptability will be the primary driving factors.
Apple Pay and Samsung Pay already lead the market. The process is straightforward. A consumer links their current bank debit card (Wise and Revolut cards work too) and uses the digital wallet’s “tap-and-go” feature to make purchases. The funds are processed instantly.
The benefit of a digital wallet is that you no longer need to carry around a physical wallet full of cards. They’re all stored on your phone. As long as you have cellphone service where you’re shopping, you’re all set.
Fintech wallets, like those from Wise and Revolut, enable you to hold funds in multiple currencies. If you’re prepared before you travel and hold money in the currency of the country you’re visiting, using these cards will allow you to avoid excessively high currency conversion fees.
Region-specific wallets are gaining in popularity, like Alipay in China and Paytm in India. These work two-fold. Alipay is accepted by merchants in over 70 countries, so Chinese travelers can shop confidently. For other travelers visiting China, Alipay is available to them by linking it to their local debit or credit cards. As it’s the most widely accepted payment method in China, it makes it easy for both locals and visitors.
Digital Wallet Downsides
While digital wallets have many positives, there are some downsides. While they’re accepted in many countries, there are still merchants that aren’t on board yet, though that is changing. Some developing countries are still running behind with accepting this technology, so check before you travel.
Security and privacy issues come into play, too. Smartphones are targets for cybercriminals, and once in, they can access card and other sensitive details. Access to this information can lead to fraud, identity theft, or financial theft. Cybersecurity monitoring is paramount.
Smartphone availability is the other stumbling block. If your battery dies or you’re in an unserviced area, you cannot access your digital cards to perform transactions.
Withdrawing cash via an ATM using a digital wallet is only possible in some countries, and the fees are high because both the card-issuing bank and the ATM operator charge them.
Your Options
Right now, a digital wallet like Apple Pay, backed by a Wise or Revolut card, plus a small amount of cash as backup, will ensure you can spend abroad whenever you need to. As more merchants move to accept digital wallets, you can consider phasing out some of the other options.