The summer holidays are nearly here.
Going on holiday is expensive enough without getting stung by using your card abroad, or getting a poor exchange rate for your cash. Costs can rack up further if you don’t check ATM charges, or if you get your holiday money last minute. Holidaymakers could be losing out on as much as £845 million every year when using their card to spend abroad, according to the Post Office.
Here are the do’s and don’ts of holiday money.
The biggest holiday money no-no is waiting until the airport to swap your currency.
“Airport bureaux de change rarely offer the best currency exchange rates, because with a captive audience of holidaymakers surrounding them, they arguably have little incentive to,” said Reena Sewraz from the consumer site Which?.
The airport that offers the worst exchange rate for euros is Gatwick, according to a comparison of rates between January and February by the money exchange platform Eurochange.
It found that holidaymakers lost out on an average of £169 when buying €1,000 at nine UK airports, compared with buying currency at its high street branches. Those buying their currency at Gatwick lost out on £274, while Stansted customers lost out on £264.
Airport bureaux de change can technically charge what they like, as they are not regulated by the Financial Conduct Authority, the City watchdog. However, if they use a regulated payment service, for example if foreign currency is being transferred to a third party, they have to follow the Consumer Duty rules, which means they have to be transparent about prices and treat customers fairly.
Compare the best exchange rates for your holiday money by using comparison tools, such as MoneySavingExpert.com or Wise.
Don’t … use your normal debit card abroad
You will usually face hefty charges if you spend using your normal debit card abroad.
Holidaymakers are charged an average of £21.79 in fees over the year when spending using their bank card on trips away, according to research by the Post Office.
There are two costs to watch out for: foreign conversion fees (which is what your bank charges when converting the transaction from the local currency into sterling) and any other transaction fees.
• How to get the best deal on your holiday cash
Barclays, Halifax, Bank of Scotland, Lloyds, Metro, Nationwide and TSB all charge a 2.99 per cent foreign conversion fee. Santander charges 2.95 per cent, while NatWest and HSBC charge 2.75 per cent.
Some banks may charge a flat fee on top of between 50p and £1 per transaction.
Some debit cards are worth considering for overseas spending though. Two of the best cards are Chase and First Direct, according to Moneysavingexpert.com. You can withdraw up to £1,500 fee-free per month using Chase, and up to £500 a day with First Direct.
Always choose to pay in the local currency to avoid a higher exchange rate.
Don’t … withdraw cash without checking fees
Make sure to check if your card will charge you a withdrawal fee when you take money abroad.
Some banks may charge between £1-£5 per withdrawal.
Even if you use a card that doesn’t charge you a fee for withdrawing money, the ATM provider might — so to help avoid this fee, check what foreign banks your bank partners with, and make sure to use one of their ATMs.
For example, the top travel credit card according to Moneysavingexpert.com is the Barclaycard Reward credit card, which will let you spend and withdraw cash abroad fee-free. Remember to pay off your bill, in full, at the end of the month.
• The five surprising places where Brits can find a good-value getaway this year
Martyn James, a consumer champion, suggests that between 20-25 per cent of your holiday budget should be made up of cash. “As we have seen recently with outages, there is no way to pay with plastic if systems go down, so cash should be considered as your emergency fund. Many restaurants also prefer cash, so having some with you is a good idea.”
Do … consider a credit card
There are specialist travel credit cards that don’t charge you fees for spending abroad.
The best travel credit cards are Halifax Clarity credit card, Barclaycard Rewards and Bip credit card, which do not charge fees for transactions or withdrawals, according to the comparison site Moneyfacts.
Fee-free credit cards are particularly useful because they come with added consumer protection. Under section 75 of the Consumer Credit Act, you can claim your money back from your credit card company for purchases worth more than £100 but less than £30,000.
Using one for a purchase will give you peace of mind, especially if you are considering renting a car and are worried about getting ripped off with unfair chargers for damage and hidden extra costs.
Do … your research if using a prepaid card
You could also consider a prepaid travel card. It is different from a debit or credit card because you will need to load money on to it first in pounds, which you can then spend in another currency fee-free. Once you have run out, you will need to top it up again.
• How to get the best deal on your holiday cash
“They also usually allow you to lock in competitive exchange rates, saving you money compared with using your everyday debit or credit card,” Sewraz said.
Again, watch out for transaction and withdrawal fees, and shop around for cards offering the lowest charges. The top prepaid travel cards according to Moneysavingexpert.com are Wise and Revolut. Wise lets you make two fee-free ATM withdrawals up to £200 a month, while Revolut lets you make the first five withdrawals free per month.
Do your research though and make sure that your prepaid card is widely accepted in the area you are travelling to.
Watch out for other fees — some may charge you a delivery fee, or inactivity fee if you don’t use your card in a certain amount of time (typically 12 months).
