Specialist firms are often more knowledgeable about the best exchange rates than a retail bank, while some also offer products such as regular foreign exchange payments abroad. These allow you to fix payments at favourable exchange rates and saves on transfer fees.
The recent collapse of Crown Currency, the broker that fell into administration and left thousands of customers out of pocket, might put you off. However, Crown operated differently to its surviving competitors: it offered rates that got more attractive the longer you were prepared to wait and this is why it ran out of money.
By contrast, most travel-cash providers carry out transactions at the time of purchase, so are far less likely to run out of money. Still, people chose Crown because of its top rates: so how can you avoid being caught up in a similar problem?
They key thing is to make sure the broker is authorised by the regulator - the Financial Services Authority - which means client funds will be kept separately and protected if it collapsed (Crown was not). Currencies Direct, Caxton FX, World First and HiFX are among those authorised by the FSA.
It’s still worth comparing rates to find the best rate - and note that some brokers will charge commission fees on top. Louise Holmes, spokesman for comparison site Moneyfacts, advises: “The main things to be aware of when making online transactions or exchanges is to check the source is legitimate. Some websites look perfectly fine, but are operated by fraudsters: if something looks too good to be true, the chances are it probably is.”