Summer holidays abroad are a great opportunity to shop somewhere different for homeware. But with the lowly level of the pound — only buying you around $1.3 and less than €1.2 — be smart and make sure you get the best deal for your hard-earned cash. Here are my top dos and don’ts.
Don’t exchange cash at the airport
Anyone approaching an exchange counter has “sucker” written across their forehead. Even after the promises of free buy-back and no commission you could still be £100 worse off for each £1,000 you spend.
Don’t use your regular plastic unless you’ve read the charges sheet
The charges can be astronomical, especially on smaller amounts. Most UK bank cards charge you a “non-sterling transaction fee” for using your card abroad, typically about three per cent of the transaction.
For debit cards there can also be a fee of between £2-£5 for using an ATM abroad. Some impose an additional spending penalty of £1-£1.50 each time you use your card. So think twice before you use your plastic to buy your cappuccino in the sun. A £3.50 spend could cost you over £5. If, however, it is all you have, use your debit card to withdraw larger amounts from an ATM and then spend cash, rather than clocking up individual fees on small transactions.
For credit cards it’s the other way round. Use them for transactions not cash withdrawals as they don’t tend to have spending charges but do have more punitive ATM costs and charge you interest on your cash withdrawal even if you pay off the balance in full.
Whichever card you use, whenever you use it, never pay in pounds when abroad. Always press the button next to the local currency. Otherwise the foreign bank/shop will do the conversion for you and it will be at a worse rate than your bank.
Do buy travel money in advance
To get the best deal you need to pre-order your currency and pick it up in person. We received the most for our £500 from City Exchange, which would convert it into €590.
If you want the money delivered to you, however, you are probably better off using a bank or the Post Office, which waives the delivery fee on larger amounts. Just make sure you pick the one that has the best rate.
Do consider getting a pre-payment travel card
There is a plastic alternative to old-fashioned travellers cheques — a pre-paid travel card. In many ways this is just like its paper cousin. You pre-load it, locking in the rate at the time, and pick the currency you want it in (euros or US dollars). If it is stolen and you contact the provider and have it blocked, you can get a new card issued and your money back. Be aware there could be a small cost for a new card.
What has changed are the costs. Travellers cheques used to charge chunky commission and high fees. Pre-paid cards can work out a lot cheaper, with companies such as FairFX offering you a free card if you load up with more than £200 and a better conversion rate than most. What can be expensive is withdrawing cash from ATMs as there is often a fee. Try to spend money on the card where you can, or take money out in larger chunks to cover cash needs.
Should you be lucky enough to be embarking on a global tour, a global pre-paid card can come in handy. Again you load it in advance, sometimes via an app, but unlike the euro or dollar cards, it doesn’t do the conversion until you actually use it. Of the many available, the pre-paid Mastercard Revolut seems to offer the best deal, with Interbank rates for most of the 80-plus currencies it covers, no load fee, no ATM fees on withdrawal up to £500 and no spending fee. Like many of its rivals the card provider is FCA-regulated, meaning your deposit is ringfenced.
Do swap your regular credit card for a specialist one
The final option is a specialist credit card. Cards such as Halifax’s Clarity or MNBA’s Everyday Plus offer competitive Mastercard exchange rates and do not charge fees on withdrawals or spending. You still have to pay interest on any money withdrawn, but it can be lower than your normal credit card. And if you pay off your balance immediately, you can keep this cost to a minimum.