Should you pay for a buy back rate when exchanging currency?
Is it worth paying to secure a 'buy back rate' when changing up your sterling for euros or dollars?
The pound recently hit its highest rate for a year and a half against the euro, which means it’s a great time to stock up. But what's the cost if you want to cash your currency back once you're back from your holiday?
You’ll certainly have no problem finding places to take money off your hands; in fact anywhere selling foreign currency will usually be happy to buy it back. But the sting is you’ll have to pay far more to swap your holiday money back than the rate you were given first time round.
Check the board at any foreign exchange outlet and you’ll see the ‘sell’ rate (the one to watch when you want foreign currency) is much lower than the ‘buy’ version. That’s the ‘post holiday’ rate to turn your euros, dollars or whatever into pounds.
Even with places claiming ‘commission-free’ deals, you can still lose nearly 20% of your currency on your return. Swap your euros back at Thomas Cook and the original over the counter ‘sell’ rate of 1.13 soars to 1.36, wiping the equivalent of £17 off every £100 exchanged.
Some foreign exchange outlets now offer you the chance to ‘lock in’ to your original exchange rate with a ‘buy back’ deal when you purchase your currency. Companies offering this include The Money Shop, Sainsbury’s Bank, Thomson, Travelex and Eurochange with fees up to £5.
Is it worth shelling out?
Of course ideally you’ll budget well enough to avoid coming home with a wad of notes to change back. Or if you do get back with more than a few euros left, either hang on to it for your next trip or, like I do, try and broker a deal with friends or family who’ve got holidays on the horizon.
But if you’re concerned about returning with a sizeable amount then securing a ‘buy back’ deal can be a savvy move. But do check the small print first as you may be restricted to returning your money to the same branch or face a time limit of just fifteen days in order to take advantage of your original exchange rate; which won’t leave much time to spare if you’re on a two week break!
How do the deals stack up?
Sainsbury’s Bank calls its version ‘buy back plus’ – it costs £3.99 with up to 31 days to exchange any unused currency, providing you head back to the same branch armed with your receipt and passport. But it’s not available with home delivery deals or its pre-paid currency card.
The Money Shop charges £2.99 for the promise of buying back up to £200 of cash within a month across any branch. Based on the rates offered at the time of writing your original £100 of Euros would net you just £88 when converted back. That's a loss of £12, making a £2.99 fee look quite attractive.
Both Thomson and First Choice’s ‘buy back guarantee’ costs £3.95 for a limit of £200. With both deals you must go back to the original shop with your receipt within 60 days. Travellers cheques and travel money cards are excluded.
Travelex offers a similar deal for £3.99; valid for 31 days on notes and travellers’ cheques. And Eurochange has three options where you can pay from £1 up to £5 to swap back a maximum of 30% of your original order within 45 days.
How much do you need to make buy back deals worthwhile?
You don't need to be changing up large sums, due to the big difference between the ‘sell’ and ‘buy’ rates offered by most foreign exchange outlets.
Over and above £20 is usually the cut off point when a ‘buy back’ rate can make it worth your while, but remember it’s a gamble as you’ve got to decide before you go whether to bag that buy back rate.
What’s the deal with pre-paid cards?
Come the end of your trip you can drain your card of leftover funds at a cash machine, though charges can reach as much as £3 a time. Or if you ask your provider to ‘redeem’ any funds, this can cost up to £5 a time if you’ve got a Monarch card.
On the flip side if you spend every penny before heading home, you could be hit with a £2.50 monthly charge for ‘inactivity’ with Ryanair’s ‘Cash Passport’ card if it’s then stuck in the drawer unused for six months and £10 if any charges leave you facing a negative balance.
Get every cent back
Most places won’t take your small change but you can get every last cent back swapping loose coinage in cash machines at supermarkets like Tesco, Sainsbury and Asda. Commission charges are high at 9%, but if you pop your coins in, you’ll get a voucher to swap for cash at the till. Put your postcode in www.coinstar.co.uk to find your nearest one.
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