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Vacation Money – Where to Buy It, How to Avoid Fees and One Thing You Shouldn’t Do
Per Brad Young It is Katya Williamsfrom the Money team
UK residents spend billions of pounds abroad every year, but it can be difficult to know how to get sterling as far as possible.
With summer fast approaching, so are the opportunities to enjoy a holiday, so the Money team spoke to three travel experts to find out when, where and how to pay abroad.
CREDIT CARD
“O the cheapest way to spend abroad is usually on plasticif you have the right plastic,” said James Jones, head of consumer affairs at Experian.
“Using credit and debit cards can be a great way to get the best exchange rates.”
He said the rates offered by exchange offices are generally “much less attractive” than those offered on some cards, which are much closer to the rates banks themselves use.
Fees can eliminate any earnings
But it’s essential to be aware of things like non-sterling transaction fees, cash withdrawal fees and credit card interest.
So buy a travel rewards card, Jones said — and do it before your trip.
“You’ll probably need six weeks, ideally.”
Extra protection
When booking a trip worth between £100 and £30,000, try paying for part of it with a credit card for “extra protection” under section 75 of the Consumer Credit Act, Jones said.
This means the card provider is jointly and severally liable with the retailer if something goes wrong, like arriving at a hotel and finding it closed.
If you’re using a credit card, make sure you can pay it off in full to avoid interest charges, said Sean Tipton of the Association of British Travel Agents (ABTA).
A trap you shouldn’t fall into
An increasingly common pitfall when paying by card (credit or debit) is the option to pay in local currency or pounds, Jones and Tipton said.
While paying in sterling may “seem like a wonderful convenience,” you’ll end up paying “a little more for your purchase,” Jones said.
If you pay in pounds, your local retailer’s bank will set the exchange rate, but if you pay in local currency, your UK bank will set the rate.
DEBIT CARD
“Some service providers do not apply fees for overseas use on their regular UK debit cards,” says Moneyfacts – but you should always check as some incur hefty fees.
Alternatively, “some service providers offer specialized travel debit cards that do not impose non-sterling transaction fees and cash withdrawal fees.”
PREPAID TRAVEL CARDS
If you want to avoid a credit check, prepaid cards can be loaded with multiple currencies and work like a debit card, without being connected to your bank.
“Typically, prepaid travel cards offer competitive rates or even no charges for use abroad, which can make them a cheaper alternative to using a regular credit or debit card while on vacation,” says MoneyFacts .
One of the most popular prepaid cards, Revolut, uses its own exchange rates, which aren’t always the best you can find – and although it’s free during the week, there is a charge at weekends, so do your research.
Also be aware: prepaid cards don’t offer purchase protection like a credit card and are not regulated by the Financial Conduct Authority.
MONEY
“Don’t just rely on a card – it could backfire if you do,” Tipton said.
Some taxis only accept cash, leaving you to face hefty charges when withdrawing from an ATM.
In some countries, like Argentina, it can be difficult to withdraw money from ATMs without a local bank account, Tipton said.
Jones added: “If you’re in a very remote part of the world that doesn’t actually have many ATMs and maybe where cash is king, then that might dictate what you need to do.”
Where and when to get money
“I strongly recommend [to] get some money in the UK,” said Tipton.
It can be difficult to find a currency exchange in some developing countries, and ATMs “have started to introduce pretty hefty fees” across the board, he said.
The exceptions are countries with really high inflation rates, where it may make more sense to withdraw money when it arrives, he added.
When to exchange currency really depends on the destination, said Laura Plunkett, head of travel money at the Post Office.
“Exchange rates change frequently, so if you have time, do your homework and lock in a rate when it’s good.”
What is a good exchange rate for Europe?
Around 80% of British holidays abroad take place in the eurozone, Tipton said.
The rate has remained “pretty stable”, but if you see the value of the pound increasing, it might be time to buy a larger amount of euros a few years in advance, he added.
Tipton said 1.2 per pound is a “pretty healthy” time to buy, but “it’s kind of a lottery.”
Every year, the pound gets stronger against the South African rand, and the same is true in Argentina, where the peso is “unbelievably weak”, Tipton suggested.
In store or online?
“Most online suppliers will insist on a minimum order value which may be too high for some people, and you will have to make sure you are at home when the order is delivered,” Plunkett said.
“But typically, online rates are better if that’s an option for you.”