Don't Pay Over The Odds For Foreign CurrencyPosted on: 17 June 2008 by Gareth Hargreaves
Choose the right way to pay for your holiday money and avoid high foreign exchange fees and transaction charges.
The best value way to pay for meals and other holiday essentials abroad is to pick the right credit card, which if you get it right can actually be cheaper than buying foreign currency. However it's useful to have some cash, for transport fares, drinks, tips and so on. It pays to plan ahead to ensure you receive the most for your pounds.
Myleene Klass is the star of a TV ad in which she picks up foreign currency for her holiday at an M&S Bureau de Change. M&S have introduced Euro and Dollar cash machines in 40 stores, but are they worth using?
M&S is including benefits such as making these euro and dollar cash withdrawals free for their credit card holders and offering a 55-day interest free credit limit. However, though high street bureaux de change such as M&S are convenient, their exchange rates are not the most competitive.
Indeed, many travel money providers claim they offer travellers 0 per cent commission but, as analysis from FairFX shows, this hides the true margins they add to wholesale currency rates when providing foreign exchange for travel purposes. Most high street providers charge, on average, a five per cent premium.
So if you do want some cash, where should you go to ensure you get the best deal? Many bureaux de change on the high street and online sell foreign currency commission free, but a mean exchange rate can negate the value of this. You really need to compare exchange rates and include any commission to find out exactly how many Euros, Dollars or whatever you will receive for £100. You may find that even a provider that charges commission is cheaper if it offers generous exchange rates.
An easy way to compare the cost of online bureaux de change is to use Money Saving Expert's Travel Money Maximiser. This tool searches a number of internet providers to find those offering the cheapest deal. Commission is included with the exchange rate, so you can tell at a glance who will give you most for your pounds.
You could also use this to give you an idea of a fair rate before telephoning round bureaux de change or hitting the streets to compare costs.
If you buy foreign currency on a credit or debit card, your bank may charge you, so check beforehand.
The most important factor when purchasing foreign currency is not to leave it until the last minute, or else you may be stung by extortionate airport exchange rates. Travellers planning to head abroad over the summer could be paying as much as 11 per cent more for foreign currency if they leave it until they get to the airport compared to organising beforehand.
Brits flying from regional airports could be paying well over the odds for their holiday money. FairFX discovered that Luton, Newcastle, Liverpool, Leeds, and City airports are the most expensive UK departure points for buying foreign currency.
Steve Willey, head of travel money at Moneysupermarket, explains, "The worst-case scenario of using travellers cheques or foreign currency from Thomas Cook would see the average Brit £45 worse off than those relying on Nationwide credit and debit cards. People loyal to Thomas Cook would be better off using its credit card for purchases as it doesn't impose foreign exchange fees."
"For savvy consumers after the best rates, the Nationwide Flex debit card is the best product for overseas cash withdrawals as there are no extra charges."
"If you are stuck with an uncompetitive debit or credit card and don't have time to get a new one, the Caxton FX or Fair FX prepaid cards are good options, allowing you to budget well and only spend what is on the card."
Prepaid currency cards work just like a debit card but can be topped up via the internet or by text.
Traditional travellers cheques are another option. Those looking for the best value for money will find that travellers cheques are not likely to be cheap, with commission and cashing in rates to take into account. However they are secure so could give you peace of mind as a part of your holiday money mix. They may be no use in remote destinations but are widely accepted in the USA.
Travel Money Maximiser: www.moneysavingexpert.com
Price comparison website: www.moneysupermarket.com
M&S Money: www6.marksandspencer.com
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