Far too many people pay too much just to pay when abroad. So if you’re planning a trip away this summer, now’s the time to ensure you get more bang for your bucks, euros or dong (the Vietnamese currency, of course).
Stealth charges abound, whether you pay by plastic or go to a bureau de change.
So here are my core 10 rules to ensure you maximise your cash.
1. Find the cheapest travel money
Ignore marketing flannel like “commission-free”, as while there’s no fee, you may get an appalling rate and be better off paying a fee. Instead simply ask: “If I give you £200, how many dollars/zloty/yen will I get after all charges?” and compare that way.
As this annoyed me so much, I built my www.TravelMoneyMax.com tool that compares more than 40 online bureaux to find who gives you the most for each country.
2. Don’t pay on a credit card at bureaux de change
Paying for currency at a UK bureau on a credit card counts as an overseas cash withdrawal. That means a £3 per £100 fee and interest even if you clear the card in full. Debit cards used to charge too, thankfully that stopped last year.
3. Get permanently unbeatable exchange rates
Spending on plastic is usually costly as banks get perfect rates, but then add a hidden three per cent ‘load’ onto what they charge us. So buy something for £100 worth of dollars and it’ll cost you £103.
Yet a few specialist ‘load-free’ credit cards, with no annual fees, mean you get perfect rates wherever you spend. So stick one in your pocket just for going abroad, and you’ll be quids in.
Of course this only works if you ensure you repay IN FULL each month or it’s 12.9-19.9 per cent APR.
The top card for use overseas is Halifax Clarity (halifax.co.uk/creditcards/low-rate-no-fee/claritycard), as its ATM charges are lower than others.
Though if you also want to use a card in the UK, the Capital One Aspire World card (www.capitalone.co.uk/aspire) pays cashback on UK spending of 0.5 per cent to 1.25 per cent, so is a good all-rounder.
For a full breakdown see www.moneysavingexpert.com/travelcards
4. Withdraw cash abroad and you pay a fee
It’s not just credit cards that charge you for using overseas ATMs – your debit card usually will too. Then you also face a charge from the ATM itself. So if you are going to withdraw, fewer, larger withdrawals tend to be better.
With credit cards, you are also likely to pay interest on cash withdrawals (as opposed to spending done directly on the card) even if you clear the card in full. This applies to the two special cards above, as well, meaning spending on them is cheaper than ATM withdrawals. But, even so, at around £1-4 per £100, it’s still not that costly.
5. Don’t get foreign cash at the airport
The bureaux de change at airports and ferryports know you’ve no alternative, so their rates don’t need to be competitive.
6. Top prepaid cards – safer electronic cash
Here, you load one up with cash when you travel, then use it like a debit card. But, unlike cash, if you lose a card, your money should be protected. You get the rate on the day you load/buy, not when you spend, so currency fluctuations can hit you.
The top pick cards based on low fees and best rates are FairFX Euro and FairFX Dollar, yet they cost £10 to get the card. However, go via the www.moneysupermarket.com website and load up with around £50-worth, and you get them free.
If not, top picks are Caxton FX (www.caxtonfx.com) and Travelex cash passport (www.cashpassport.com).
7. Beware the debit cards from HELL
Bizarrely, ordinary bank debit cards are often the worst way to spend abroad. Not only do they load exchange rates and charge high ATM fees, some also effectively fine you £1-£1.50 each time you spend. The debit cards to avoid using abroad are: Santander, NatWest/RBS (avoid for smaller purchases), Halifax and Lloyds.
Buy something costing £5-worth of euros with one, and you can pay £6.65 for it, so a bureau de change is cheaper. Or if you have to use one, withdrawing a decent chunk of cash works out better.
8. Beware if asked “want to pay in euros or pounds?”
If you’re using plastic abroad, sometimes you’ll be asked if you want the transaction to be in pounds or the local currency (eg, in Spain, “pounds or euros?”).
Always pay in the local currency (eg, in Spain, euros). This is because if you select pounds, then the foreign bank will do the conversion for you and the rates can be hideous. You’re far better in most cases to have your home bank convert it for you – and to do that, you need to pay in the foreign currency.
9. Not booked yet? Where will your pound go further?
While the euro rate is low, it doesn’t mean there aren’t good buys. Surprisingly, a three-course meal in eurozone Portugal is £19, while non-euro Turkey is £54, according to a recent Post Office survey.
Portugal, Spain and Greece come up trumps if you’re looking to get the most for your money. Outside Europe, you’ll get the most bang for your buck in the USA.
10. Am I better to wait to change my money overseas?
This is a tough one to answer. It is possible a local bureau de change when you get there will give you a brilliant rate – though it’s very difficult to know in advance, and not that common.