Foreign currency exchange: don't get ripped off on your travel money
If you're buying your holiday money, be sure to follow these steps to avoid getting ripped off.
If you’re planning a holiday, there are plenty of currency buying blunders to avoid!
Companies offering foreign exchange all offer different rates to the public, so choose wisely. Buying at the right time and in the right way could be the difference between scrimping on the last day of your trip, or dining out with enough money left over to buy souvenirs at the airport.
You wouldn’t knowingly buy a toaster that was more expensive in one shop compared to another, so don’t make this mistake with currency either - compare the rates on offer.
Don’t just shop on the high street
Although online providers are likely to be cheapest, the majority of people swap currency at the Post Office, at travel agents or at banks or building societies, with these three holding a combined 67% share of the market in 2010-11, according to figures by the Office of Fair Trading.
Here's a comparison for buying 1,000 Euros, excluding delivery charges or other fees:
|Supplier||Rate||Cost in £|
|Covent Garden FX||1.2268||£815.13|
Source: My Travel Money, rates correct as of 5th July 2012
But if you really don’t have time to order online and need to buy your currency on the high street, from the Post Office for example, don’t pay on your debit card as there is likely to be a charge. Withdraw cash from an ATM instead.
Factor in fees and charges
When you're comparing currency providers, you should make sure you compare any fees and delivery charges as well as the exchange rates on offer.
Never buy at the airport
According to some estimates, it is around 10% more expensive to buy at the airport. If you always leave things to the last minute you can still aim for a better deal. For example, Travelex lets you order money online, at a better rate, up to four hours in advance of you picking it up at the airport.
Using your debit and credit cards abroad
Charges apply for overseas spending and cash withdrawals on most debit and credit cards and they can be pretty hefty. The cost varies depending on the type of card you’re using and what you’re using it for.
Some credit cards are actually good for purchases abroad and offer the best exchange rates with no additional fee, such as the aqua Reward card and Halifax Clarity card. However, charges for withdrawing cash on credit cards are typically 2-3%, or 1-2% for debit cards. The same is true of spending on cards so check with your bank what fees apply before you travel.
When paying a restaurant tab while on holiday, always pay in local currency if you’re given a choice. Some restaurants ask if you want to pay in sterling but you could be stung by their high exchange rate if you accept. This is called dynamic currency conversion – avoid it.
Don’t pick a card that charges you multiple fees every time you want to do something with it. Prepaid cards often offer good exchange rates and work like a debit card, but you can only spend what you have loaded onto it. However, check what the costs are for spending and withdrawing cash abroad, as well as monthly fees and charges for topping it up.
Read The best prepaid cards for spending abroad for more.
This article has been updated