Does everyone understand exchange rates, currency exchange and all the jargon used in financial services? Probably not. However, a little bit of homework can pay dividends when changing sterling into foreign exchange, choosing a pre-paid card for your holiday spending, selecting traveller's cheques or even using your own debit or credit card overseas.
To make things as easy as possible we have written this guide to how to choose your options and where to go to get the best deals and advice.
How do you decide what is best for you?
Before even deciding on what form to take your holiday money in, you need to estimate just how much cash you will need. Start this exercise at least two weeks before you travel to ensure you have time to get the best overall deals.
Note down what you have to pay out for, from food to accommodation costs, spending money to taxes and fuel for hire cars through to evenings out. Estimate how much you will need. It is always worth bearing in mind the cost of living in destinations. This can easily be found in good up-to-date travel articles on line about the destination or in the Post Office or Thomas Cook's regular reports on cost of living in different destinations.
Once you have an idea of how much you need, then check out the currency of the country you are travelling to. For the most popular countries this is straightforward, however for some it is worth taking your money in a third currency e.g. US Dollars for South America rather than sterling.
And don't worry about all those weird terms - we have written a jargon buster to help you understand what everything means.
Keep it simple
When working out how much money you are going to get for your sterling cash, do not get worked up about the rate of exchange or commission charges. This is all smoke and mirrors to often make you think you are getting the best deal when often you may not be. Ignore anything that says free currency exchange or best exchange rates. Often they are not what they seem.
Simply follow the two examples below to determine what the best deal is going to be when buying cash or pre-paid cards.
If you want a set amount of foreign currency e.g. Euros 1000, then ask how much is will cost in pounds - the lower the amount in sterling the better the deal
If you want to exchange £1000 into Euros - then you want the highest number of Euros for the best deal
If you're planning to rely mostly on [plastic then you may be wondering how you can get the best debit or credit card deal. Read on as we consider the pros and cons of each different way to pay overseas....
So what methods can I use to take my money abroad?
There are four main ways to take your money when you travel abroad:
- Cash - either in sterling to change overseas or in foreign currency for the destinations you are travelling to
- Pre-paid cards with currency loaded onto them for spending in shops and withdrawing cash from ATMs
- Travellers cheques - the original travellers best friend for money
- Using your existing debit or credit cards
There is no set rule on which is bext, because everyone's spending patterns are different, so check out which is right for you and follow our top tips for getting the most from your money.
Ideally, you wan to carry a mix of spending options so that you're not relying on any one thing.
- Take a small amount of currency with you to get you going and in small denominations wherever possible
- Use pre-paid cards wherever you can for the bulk of your cash and spending needs unless you have a market-leading debit or credit card especially designed for overseas use
- Take a small amount of sterling notes for emergencies
- Have credit and debit cards as a back up
So what are the pros and cons of each method?
- Take sterling cash and changing it overseas
For many, this seems to be, the simplest option as it means you have complete control over how much money you have to spend and how quickly you are getting through it. However, most people are often confused by exchange rates and commission charges so we would not recommend taking this option. You are also likely to be changing your money in the heart of holiday resorts or airports which will not give you the best rates. There is no harm in having a few pounds with you in notes to change in emergencies only.
- Taking foreign currency cash bought here in the UK
Buying your holiday cash here in the UK is convenient, easy and offers some of the best value around. You can buy over the internet for home or airport pick up, choose from a range of high street travel agents and bureau de change, as well banks, building societies, supermarkets and the Post Office.
You have chance to get used to the money before you go and work out the value of the notes and also know that is one less thing to worry about. However you need to be aware that taking huge sums of cash with your can be dangerous and if you lose your money or have it stolen then your travel insurance may not pay out for high amounts. So be careful and use safety deposit boxes abroad to store your money in additional to a good quality travel insurance policy.
So where is the best deal?
Without doubt, the best exchange rates are on the internet and on many deals of £300 or over these companies will offer free delivery to your home address. It is simple to order online and you can often speak to a sales agent for assistance. Always pay by debit card or bank transfer. Allow yourself two to three days working days minimum before you go to order. Find some great deals here.
If the internet is not for you then visit the high street travel agencies or Post Office for the best deals. Outlets such as Thomas Cook stock a huge range of currencies and can order in money for a wide range of more unusual countries with only 24 hours notice. Bigger branches have dedicated staff that know their products inside and out and can advise you well on what to take. However beware smaller branches where staff may only deal with holiday money on an adhoc basis.
Always be aware that when visiting a high street location, the staff are trained to sell you the products that earn them the best deal and this may not always be the best value you for you.
The worst deals are generally in your bank or building society so avoid these at all costs, you risk getting poor rates of exchange and poor advice.
Finally - avoid buying at a UK airport at all costs as you will pay way over the odds for your holiday money. The difference between buying on line and buying at the airport can be as much as 10%. That means buying €1000 it would cost you nearly £90 more at the airport for the same thing - hardly a duty free deal eh!
Top tip - if you run out of time and have no option but to get your money at the airport, then use either Travelex or Thomas Cook online to order your cash for airport pick up. This way you get the internet rates with the convenience of airport collection. Do not use ICE, the other main airport provider; they do not offer internet rates on airport pick ups.
What if I have money left at the end?
Wherever possible don't try and use it up on goods that you don't want or need. And don't use it on the holiday plane as the rates you are given on board are a rip off. If it is a currency you are likely to use again, then if possible hang onto for your next trip. Or sell it to friends or family for the rate you bought it for. The worst deal will be when selling it back to the place you bought your cash. You are often offered a poor rate and a commission charge that will eat into your money, so clever budgeting really does pay off.
The newest kid on the block is the pre-paid card. Effectively this is like a debit card or a gift card where you load your account with money and then use it in cash machines to withdraw cash or in shops and restaurants to pay for goods. You can't overspend as the card will stop being authorised once your funds run out, so it is ideal for following a budget and you can check your balance at either a cash point or online.
The cards come in a variety of currencies, have a pin number that is personal to you and you can re-load your card at any time on line. They also offer security in that you can't lose your cash as long as you keep your pin secret. If the card is lost or stolen a replacement can be issued.
How do I get a card and where is the best deal?
Just like for currency you can buy online, on the high street and through banks. Follow the same rules as for cash to get the best deal, with the internet consistently offering the best overall deals. When travelling in the Euro zone, take out a Euro card, for the USA take out a US dollar card and so on. You can also get cards for a number of other currencies such as Aussie dollars. If there is no option in the currency of the country you are travelling to then you can take out a Global Currency card which is issued in sterling. When you use the card the latest rate of exchange will be applied.
When choosing a card issuer, ask about charges. Many now offer free card issue, free ATM withdrawls and free transactions in shops. Some have just low charges on ATMs, so be careful to avoid taking any card that charges if you can avoid it.
What if I have money left at the end?
Most cards are valid for a number of years so you can re-use them again on your next trip. However beware that at the end of the card's life if you have not transferred the money off the card you will lose it.
Top tip - never use your pre-paid card as a guarantee at a hotel, car rental or other product where you pay later. Hotels and car hire companies often pre-authorise an amount from the card, however this effectively blocks the amount on your pre-paid card which will prevent you from either withdrawing the cash or spending in a shop as the money is set aside by the card issuer. It can take several days for this authority to clear, so always use a credit card instead for hotel or car hire check in
- Travellers Cheques - does anyone still use them?
Travellers cheques are still available fairly widely; however the arrival of the pre-paid card has made them redundant for many travellers. They still offer great security with their replacement service, however they are not convenient to use and you will not get the best rates of exchange, plus you are often paying a commission charge as well when both purchasing and exchanging them.
So why does anybody still use them?
If travelling to the USA they are still widely used as cash and if you want a form of back up then they can be useful as a great option. However most travellers have no need for them anymore as there are better options in cash, pre-paid cards and the market leading debit and credit cards. If you don't use them you can often pay them straight into a bank account if in sterling or exchange back at your cheque issuer when in foreign currency. However you will lose out on the exchange rate, so if you are planning to travel back to that country again in the future hang onto them as they never go out of date.
- Using your own debit and credit cards abroad
Read our guide to using your cards overseas