Find out how to get the best rates on foreign currency and avoid excessive holiday expense
With Brexit on the horizon and the value of the pound in a constant state of flux, getting the best possible rates on foreign currency has never been more important for budget-conscious jetsetters.
So what can you do to avoid overspending at the bureau de change, or being lumped with hidden charges whenever you spend money abroad? We’ve compiled some tips to help you get the best deal while on holiday.
The main options for spending money abroad
While many prefer the convenience of notes and coins when budgeting for a holiday, cash isn’t always king. Opting for plastic can mean added security and better exchange rates.
Easy to budget with and widely accepted, cash is understandably an appealing option when travelling abroad. In order to get the best rates when switching your UK pounds for Euros, dollars or any other kind of currency, it’s smart to shop around and compare the rates offered by different companies, rather than rushing to your nearest bureau de change the day before you go away.
With exchange rates prone to change (particularly in the wake of the Brexit vote), it can be difficult for consumers to know the best time to exchange cash before going away. One way around this is to order your cash at the current rate, then pick it up shortly before you leave.
If the pound drops in value, you’ll have benefitted from ordering your cash when rates were better. If it increases in value, you can cancel your order and buy your currency at the better rate (some companies charge a fee for cancelling your order, so look out for bureaux de change that offer free cancellations).
While most credit cards charge fees if you use them abroad, some are specifically designed for use in foreign countries. By using a credit card that’s specifically designed for travel, you can avoid extra costs such as non-sterling transaction fees, cash withdrawal fees and interest fees, as long as you pay your bill in full each month.
Paying for big purchases with a credit card means you’ll also be protected by Section 75 of the Consumer Credit Act. This applies to any purchase costing between £100 and £30,000, so if anything goes wrong (for example, a travel company going bust before you make your journey), you’ll be able to get your money back from your credit card company.
Prepaid travel card
Credit cards are certainly an appealing option when travelling, although using them means you’ll be subject to whatever the exchange rate is at the time of your purchase. If you’re worried about exchange rates falling before you go away but still want the security of paying by card instead of cash, a prepaid travel card might be for you.
Prepaid cards work by letting you load up the card with cash before you travel. You’ll get the exchange rate offered on the day you load up the card – this can be good if the market flops before you go away, as you’ll already have benefitted from the better exchange rate.
It’s important to note that unlike credit cards, prepaid travel cards don’t come with Section 75 protection, so for big purchases it may still be better to pay using your credit card.
When’s the best time to buy cash before going on holiday?
With the political turbulence of Brexit affecting the value of the pound, it can be difficult to judge when the best time to exchange money is before going on holiday.
Currency rates change all the time, so unfortunately there’s no right answer for when it’s best to change your money. If you’re worried about the pound falling, you can hedge the risk by loading a prepaid travel card with half your spending money, and wait until nearer the time to buy your remaining cash.
If the pound does fall, you’ll have benefitted from loading your prepaid card with money when exchange rates were more favourable.
Common travel money mistakes
Using money abroad can be a minefield of hidden fees and unexpected costs. We’ve outlined some of the most frequent foreign spending mishaps to help you minimise unnecessary expense while on holiday.
Buying foreign currency with a credit card
When exchanging cash before going on holiday, it’s best to use your debit card. Using a credit card isn’t a good idea, because credit card companies treat currency exchanges the same as cash withdrawals – you could be subject to withdrawal fees, interest and other hidden costs, even if you pay off your credit card bill in full at the end of the month.
Buying foreign currency at the airport
Airports usually have a bureau de change. However, the rates offered at these are often much worse than if you’d bought your cash elsewhere. If it’s a last minute trip and getting cash at the airport is the only convenient option, you’ll benefit from better rates by ordering your cash online before you pick it up.
Using a UK debit card while abroad
Many UK debit cards charge a foreign usage fee of up to 3% when withdrawing cash while abroad, as well as a cash withdrawal fee. Some debit cards (including those offered by Lloyds, Halifax, TSB and Santander) charge fees whenever you spend on them abroad, regardless of whether you’re using them in an ATM or a chip and pin machine. For this reason, it’s generally best to steer clear of using your debit card abroad unless absolutely necessary.
Choosing to pay in pounds instead of local currency
It’s quite common when travelling to be asked if you’d like to pay in pounds or the local currency (for example, Euros). Paying in pounds means you’ll be subject to the generally-unfavourable exchange rates of the company you’re purchasing from. Choose to pay in local currency, and you’ll usually get a better deal.