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Are fintech apps a smart way to access cash abroad?

July 11, 2022
10 min read
Cropped Hand Inserting Credit Card In Atm Machine
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One hassle that frequent travelers face time and again is how to inexpensively get cash abroad. For most people with a U.S. bank account, withdrawing money from an ATM while traveling is the easiest solution in most locations worldwide.

There also are numerous financial technology (fintech) companies that offer banking services to make sending and receiving cash abroad cheap and hassle-free. Two fintech apps that are especially popular with travelers are Wise and Revolut.

Wise (formerly known as TransferWise) offers the Wise Card to customers wanting a payment method that can be used “almost everywhere debit cards are accepted,” according to the company. Similarly, Revolut gives its customers the ability to make secure payments and manage money via its prepaid Revolut card.

But how do the two companies compare to traditional banking alternatives? We took a closer look at available options for accessing cash abroad to find out.

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Spending money abroad

(Photo by Thomas Barwick/Getty Images)

It's a known fact that traveling abroad involves spending money. Even the most prudent user of points and miles will need to pay for some items like transportation and food out of pocket.

To pay for these extras, both Wise and Revolut offer prepaid cards that can be used at many domestic and international merchants where credit and debit cards are accepted.

If you use your Wise debit card to make a charge in a currency that you don’t hold in your Wise account, Wise will automatically convert your money in real time “for a tiny fee.” In practice, this fee varies by country and currency, but at the time of writing, it was 0.42% for residents in the United States for converting U.S. dollars to euros.

Revolut operates similarly, noting on its website that its “exchange fees help cover the cost of exchanging uncommon currencies and the uncertainty of making exchanges while the market is closed.” Depending on your plan, you may be charged a currency exchange fair use fee of up to 0.5% in addition to a markup of 1-2% of the interbank exchange rate on foreign currency conversions made outside of foreign exchange market hours.

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Even with credit cards that charge no foreign transaction fees and no currency conversion fees, you will pay a markup. For example, the Visa processing network charges a floating markup that typically hovers around 0.5% beyond the European Central Bank rate, though I saw markups as low as 0.12% during my research. So, the fees attached to prepaid cards from Wise and Revolut are not significantly higher than what you'd pay with a credit card.

Still, for most consumers, the best option for cashless payments abroad is a credit card that offers no fees on foreign transactions and a 0% currency conversion fee. Cards from Capital One make a great choice for those traveling abroad, as the bank charges no foreign transaction fees on any of its credit cards.

Using a credit card will also give you protection against fraud and can grant you a host of consumer and travel insurance benefits that you won't get from a fintech app. Know, too, that a credit card will give you the opportunity to earn rewards for purchases you make abroad, so using one of the best travel cards, which offer bonus points or miles for travel and/or dining, may be the better way to go.

Related: What is a foreign transaction fee?

Getting cash abroad

(Photo by Astrakan Images/Getty Images)

Not every place offers widespread credit card acceptance, making accessing cash a necessity in many countries. Depending on where you travel, you may need cash for most purchases you make or only for small vendors and souvenir shops.

Both Wise and Revolut offer customers the ability to get cash from ATMs abroad. But in both cases, fees can add up quickly.

Wise only lets you make two free cash withdrawals totaling $100 from an ATM each month before it starts charging U.S. residents fees of up to $1.50 plus 2% of the amount greater than $100. Additionally, the company charges a small fee if you take cash out of an ATM in a currency that you don’t hold in your account. Wise does not mention reimbursing ATM fees charged by ATM networks, so in most cases, users can expect to pay an additional fee charged by the ATM operator.

Revolut touts its network of 55,000 in-network ATMs that offer unlimited “100% fee-free ATM withdrawals.” However, it's unclear how many of the in-network ATMs are located abroad. Should you need to get cash using your Revolut card while traveling internationally, you should check the app in advance to see if any fee-free ATMs are located in your destination. While Revolut does offer up to $1,200 per month in fee-free withdrawals at out-of-network ATMs, it charges a fee of up to 2% of the value of the withdrawal after that. Another downside is the fact that Revolut does not reimburse ATM fees charged by third-party ATM networks.

If you are a traveler who needs the ability to access cash from your bank account abroad, you can find a traditional bank that offers better options. Charles Schwab is one of the best banks for travelers, as it not only allows unlimited fee-free withdrawals both domestically and internationally but also reimburses ATM fees charged by ATM operators worldwide.

Even if you are not wanting to open a new bank account, there are several ways to minimize the cost of accessing cash that don't require using a fintech service.

Related: The top 9 checking accounts for avoiding foreign ATM fees

Receiving payments abroad

If you have business abroad or travel for longer periods of time, you may need to receive payments from people scattered all across the globe.

Wise’s offering could be a solution, as the service offers local bank account details in 10 different banking areas. If you need to receive payments within the eurozone, Wise will give you a bank code and an International Bank Account Number (IBAN). Need to receive a few dollars Down Under? You can get an Australian Bank State Branch (BSB) code and an account number. Having these details can make it easier for locals in the covered areas to pay you.

Revolut takes a different approach to help customers receive payments while overseas. Rather than provide local bank account details, the company offers person-to-person transfers similar to apps like Venmo. Customers also have the ability to request money through a QR code link.

If you receive frequent payments from other countries and want a more convenient way to be paid locally, Wise may be the best way to receive funds without opening a local bank account. Wise is especially appealing for those based in the European Union, as direct transfers to bank accounts in the Single Euro Payments Area are a common and easy way to make payments.

That said, those who only occasionally receive payments while outside the country may want to consider wire transfers and money transfer services like Western Union and Moneygram instead of a fintech app. Both of these companies offer reasonable fees (if any) and typically make it possible to have money deposited directly into your bank account or picked up at any of their hundreds of thousands of locations worldwide.

Dealing with fees and customer support

(Photo by Tom Holmes via Unsplash)

One of the biggest criticisms of fintech companies is that their fee structures make it difficult to understand how much you pay to use them. In many cases, transaction-based fees make up a large portion of fintech companies’ revenues, and Wise and Revolut appear to be no different.

Wise claims a transparent and simple fee schedule, but several of its fees are hidden in its terms and conditions. Its fees for cash withdrawals can add up quickly, even for normal use cases. Need to take more than $100 cash out of an ATM in a month? You’ll be paying at least a 2% fee. Want to add funds via a debit card? That will be 1.22%. Hoping to withdraw funds from your Wise balance to your U.S. bank account? That will be $1.05 per withdrawal, please.

Revolut’s fee structure can get even more expensive. Its Metal plan can cost up to $16.99 per month, and fees for cash deposits at retail locations can set you back as much as $4.95 per transaction. Lose your debit card? The first replacement is free, but after that, you'll be hit with a $70 fee to get a new Metal debit card.

In addition to high fees, fintech companies are sometimes difficult to deal with if something goes wrong. Wise keeps access to customer support behind a login page, which is probably fine until you get locked out of your account. Revolut offers an automated phone line or in-app support — but that's it. In fact, customer complaints about Revolut's lack of support are common enough that it received some negative coverage in 2020 when many customers were trying for months to resolve issues around automated account lockouts.

Bottom line

For most travelers, getting cash and making purchases abroad is easiest to do with a credit card that offers no foreign transaction fees or a debit card that allows no-fee withdrawals from ATMs and reimburses third-party fees. However, fintech apps like Wise and Revolut are available, should you desire an alternative way to access cash while overseas.

Given the added fees, lack of reliable customer support, limited in-network ATMs and other downsides of using fintech services, opting for a credit or debit card will likely be your best bet. Just be sure to do your homework first so you find the option that will work best for your lifestyle and travel habits.

Related: 5 cards I take with me on every trip abroad

Featured image by Getty Images/EyeEm
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.