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The Problem with Spending Abroad
When you plan to travel abroad you are inevitably going to run into the problem of how you finance your trip whilst you’re away. Do you take foreign currency? Do you use your regular credit/debit card? Or is there a more innovative solution? In the past year I have travelled to France, the Netherlands and the USA. I knew that the debit/credit cards I had wouldn’t have been suitable to use due to their foreign exchange charges. If I wanted to buy something, no matter what the cost, my bank would have charged me a flat rate foreign exchange fee. This made little sense.
Instead I opted for the prepaid currency card. These cards are loaded with the currency of your choice (eg. Euros) and can then be used like regular debit cards whilst abroad. So if the price is in Euros, you pay with Euros. This solved the problem of having to take a lot of cash but there was another issue, the exchange rate.
When you load a lot of these prepaid travel cards the rate of exchange is not the base rate. So if the base rate that day might be £1 to €1.14, you might actually only receive €1.10 for every £1 you load on to the card. This is how the travel card company makes money so this wasn’t an ideal solution either. Thankfully, there was an answer to this problem. Revolut.
What is Revolut and How Does it Work?
Revolut is a fintech (financial technology) company that was launched in 2015 which grants customers the ability to transfer money internationally at the interbank exchange rate, fee-free. In other words, when you spend money in a foreign currency, it converts that amount using the base exchange rate and deducts that amount from your local currency account. So if you spend $10 using your Revolut card and the interbank exchange rate is $1 to £0.75, your account will be deducted by £7.50.
The one caveat is that due to the forex markets being closed on weekends, there is a markup of 0.5% on major currencies and 1% on other currencies from Friday (00:00) to Sunday (23:59). Revolut states this is in order to protect the company from losses due to large fluctuations. On weekdays, there is no flat charge added on to the exchange and the exchange rate is the same as the interbank rate, not lower. You can add a linked bank account meaning you can simply top up your Revolut account before/during your trip.
How Does Revolut Make Money?
Revolut has quite a few revenue sources. Here are a few. Firstly, it's most obvious, is the premium service costing £6.99 per month. I do not use the premium service myself but, amongst other features, it doubles the free ATM withdrawals limit to £400/€400 and global medical insurance is included.
Revolut also provides personal loans through Revolut Credit, where it generates income from interest charged on outstanding balances. Additionally, any time you spend with the card, Revolut gets a cut of the payment processing fee paid by merchants to MasterCard/Visa.
Track Your Spending
I think it’s easier to lose track of your spending when you’re abroad rather than when you’re at home. This is partly because your everyday spending changes completely. You might be eating out every day, buying souvenirs, using Uber to get around. Plus, if the prices are in a foreign currency, it can be hard to gauge if you are finding a good or a bad deal. As I discovered during my trip to the USA, Revolut offers something more than just your standard transaction history. It allows you to analyse your spending in more detail, facilitating your expense tracking.
You can view your spending by category (eg. travel, restaurants, groceries), merchant (eg. Starbucks) and country. The country tab might be more useful on a multi-location trip. This makes you more conscious of your spending and frankly this should be a service most banks offer in general. If you are wondering how this works, every time you make a transaction with a merchant there is a code tied to that transaction. This allows companies like Revolut, Amex etc. to track how much you spend in each category.
If you’re travelling abroad with other people, this can complicate your foreign spending even further. Imagine a pretty common scenario on holiday where you are out for dinner with 3 other people. To make the transaction easy you put for the entire bill on your card. Everyone has agreed to pay for their own portion of the meal but you might forget if you’re busy doing other things. You’re on holiday so you want to deal with this quickly and easily.
If you go on to the Revolut app and click on the transaction, there is a ‘split bill’ option. You select the contacts you are splitting with and this takes you to the splitting page. The default option will be to split the bill equally between everyone but you can alter these numbers. Once all of the numbers are correct you send a request. The others will get a notification and if they have the revolut app you can settle the bill with only a few taps.
The App Itself
Sometimes an idea is good but the execution is poor. Here the idea is good and execution is great. When you open up the app you are asked to sign in. I have an iPhone with touch ID and I can sign in using that feature rather than having to remember a pin. Once you’re signed in you are taken to the ‘Accounts’ tab which shows you a scrollable graph of your account balance. The interface is sleek and responsive. Underneath you will see a history of your transactions which displays information such as category, merchant name, date/time, transaction value in the local currency and the amount deducted from your account.
The next tab titled ‘Analytics’ allows you to track your spending, as previously mentioned. In the payments tab you can send/request money to/from one of your contacts. You can also split a bill in this section. Going back to the restaurant scenario, you might have paid for the entire bill in cash. This means you won’t have a transaction on the revolut app to split. Instead you can use the ‘split bill’ feature in this section and input an amount (ie. the total restaurant bill). As before, you can alter the amount owed by each person and then request a payment from them.
The ‘Cards’ tab grants you some control over your Revolut card. You can freeze/unfreeze your card if required. If you have forgotten it, you can view your pin here. You can alter the specifics of your card security. For example, you can turn on/off swipe/contactless payments, ATM withdrawals, online transactions. You can also set a monthly spending limit if you would like to reign in your spending with a hard limit.
The ‘More’ tab allows you to view your profile, get help and use additional features. One useful feature I used was the ‘Rates’ feature. You can add currency pairs in this section (eg. GBP:USD or GBP:EUR) and then view live exchange rates. This is more for informational purposes but it’s useful information and the app makes it easy to obtain.
When I signed up to use the service I thought this would be similar to other prepaid cards, just with a better exchange rate. But the additional features really make it stand out. The spending analytics and the split bill feature in particular make it a really useful app for travelling. Holidays are designed to be a break from everyday life and Revolut means you have one less thing to stress over. All I have to do before a future trip, money-wise, is to put the revolut card in my wallet and top up the account.
order a Free Card and Support this Website
If you use this link to sign up to Revolut, you can order your free physical Revolut card and help support Capital Matters. All you need to do is sign up and top up the account for future use.
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