How to pay less for your holiday money

Posted on: 12 May 2010 by Mark O'haire

Holidays come at a cost, so why pay extra every time you buy something or take out money overseas? Here's our guide to avoiding those charges.

The summer holidays are fast approaching, but if you're going abroad and don't want to carry wads of cash around with you, a prepaid card loaded with foreign currency could be the solution.

You load the card with cash before you go away and then use it as you would a credit or debit card. Most cards are accepted by shops and restaurants using the Maestro network.

The main appeal of prepaid cards for holidaymakers is that they offer a safer alternative to carrying cash around, as they use chip and pin technology. They also mean that even if stolen, thieves don't gain access to your bank account or credit card.

Prepaid cards can also be blocked and replaced if stolen or lost, usually for a fee of about £10, so money loaded onto the card is protected.

Save cash on costly fees

Perhaps most importantly, they also tend to be much cheaper than most debit and credit cards for overseas use.

Most banks and building societies charge a foreign usage transaction fee of between 2.75% and 3% every time you make a purchase on your credit or debit card, as well as cash machine fees of up to 3% of the amount withdrawn.

That said, prepaid cards don't tend to be quite as cheap as some of the specialist credit or debit cards designed for overseas use, such as the Santander Zero credit card which has no foreign exchange loading anywhere, or fees for withdrawing cash.

However, you don't need a good credit record to qualify for a prepaid card. In addition to this, they avoid the temptation for you to spend more money than you have, as you can only spend what is loaded onto the card.

The new travellers cheques

According to Bob Atkinson, a travel specialist at, prepaid cards are "the new travellers' cheques" and offer security and convenience.

Bought and managed either online or from high street locations, they offer rates of exchange that are the same as buying currency and can often be obtained without any commission, he added.

"They are available in a range of currencies - the most popular being the euro, US dollar and sterling. Money is obtained by using cash machines or you can use the cards in retailers and shops with a personalised pin," Atkinson explained.

"Many cards are now offering free cash withdrawals and no charge for usage and can be delivered free of charge to your home address or collected at an airport or port location. And if you lose your card you have the security of knowing it can be replaced and your money is not lost."

Mind the Ts & Cs

You do need to examine the small print carefully, however, as prepaid cards often come with several different charges, including replacement fees and transaction fees when you spend or make a withdrawal.

However, there are a few cards which keep these charges to a minimum and will prove cost-effective if you use them for your holiday spending.

The best cards for foreign usage are from Caxton FX and FairFX. These cards are available online and can be loaded with euros or dollars. They don't have any spending or foreign usage fees, although FairFX does charge a small fee for cash withdrawals.

The FairFX card, which can only be applied for online, has an initial application fee of £9.95. However, if you apply through this fee is waived as long as you put more than $20 or €10 on the card.

If you put £500 or more on the card when you open it, then FairFX will top this up by a further £5.

Once you have taken out the card, the only charge is either €1.50 or $2 each time you withdraw cash. You can top up the card using your debit card online. The card can be used with any retailer with an electronic terminal that accepts MasterCard.

Three cards on offer

Caxton FX offers three prepaid currency cards, the euro, the dollar and the Global Traveller card in sterling, which is suitable for use worldwide.

Again, there are no purchase or foreign loading fees and the cards can be topped up online or over the phone with a debit card.

The minimum amount you can load onto the card initially is £100, €150 or $200, and you won't be charged when you withdraw money from a cash machine abroad.

However, exchange rates tend to be marginally less competitive than those offered by FairFX. You can top up the Caxton FX card either online or over the phone using your debit card.

If you need to take money in a currency other than euros or US dollars, then the Travelex Cash Passport may be worth a look.

This offers the South African Rand - ideal for those travelling to the World Cup - as well as Australian, Canadian, New Zealand and US dollars and euros.

Available in store

You can buy the Cash Passport card in any Travelex store or online via their website, or you can also buy one at any participating branch of Thomas Cook, Co-operative Travel, Tesco, Cambridge Building Society, Derbyshire Building Society, Sainsbury's, Dudley Building Society, Leeds Building Society and Saffron Building Society.

You need to take along some photo ID and you can then load up your new Cash Passport card. While there is no fee for spending abroad, there is a 2% charge when you top up the card. There is also a £2 fee if you don't use the card for 12 months.

Remember that if you do decide to take a prepaid card on holiday, then the exchange rate you get will be the one offered on the day you load the card.

That means that if the pound strengthens after you've bought the card, you won't be able to benefit from this.

Whatever you decide to do, don't wait until you reach the airport or ferry terminal to buy your foreign currency.

Bureaux de change operators rely on our apathy and know they can get away with offering poorer exchange rates and expensive commission when you have no choice but to buy it then and there, so beat them at their own game and always sort out your foreign currency before you leave home.

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