If you’ve not been on a plane since before the pandemic, then prepare yourselves… Things have got a lot more expensive.
In fact, so extensive are the increases in prices – from airline food to dining out abroad – I’ll write a separate column for you next week on what to watch out for.
One sector that’s experienced some dramatic changes is buying foreign currency. This time last year, readers were telling me that they were struggling to find foreign exchange booths in stations across the UK. That’s because the lockdown killed off a lot of those traditional businesses. I’ve spotted foreign exchange bureaus creeping back since then. But often the deals you get are rather rubbish.
So let’s take a look at the options available to you if you’re buying cash to spend abroad.
Pre-paid travel cards
I used to be a bit ambivalent about pre-paid travel cards. These cards allowed you to ‘load’ them with the currency of your choice so you could use them like a debit card when abroad. The advantage of doing this was you weren’t carrying around huge wadges of cash, making you a target as you travelled around abroad.
However, travellers are leaving up to half a billion (!) sitting around on pre-paid cards (up by a third from last year). Many are reluctant to take money off the cards because of concerns about charges for conversion. However, some companies charge a ‘dormancy fee’ each month when you fail to cash out the cards. So slowly but surely your money will reduce.
I’ve checked out all of the cards and Currensea offer the best option from my research. Unlike other pre-paid cards, it’s free and there are no hidden fees. You can also monitor your spending in real time on the app so you know exactly what you’re paying in pounds, check live currency updates and they have the best exchange rates I’ve seen in comparison to all the other competitors in this column. Oh and because the money doesn’t ‘live’ on the card, it’s protected in case they go bust and you can still ‘charge back’ cash if there’s a dispute over goods and services that you’ve paid for.
If you use a prepaid card, then check to find out what fees there are for cashing back your money at the end of the holiday. Ask about fees for using ATMs and what happens if the business goes bust (where does your money live?)
Using a credit card
There are some specific credit cards that give you pretty competitive exchange rates on the day you spend. However, not all credit cards are the same so don’t assume that the one you currently have will provide good value for money.
Check comparison tables for specialist credit cards that are created for the foreign traveller and don’t generally charge fees (though withdrawing cash from an ATM is usually a bad idea). Be aware that the application process, acceptance and delivery might take a few weeks. Other credit cards may have good rates but check what the fees are for using them abroad before you travel.
Credit card purchases are also covered by section 75 of the Consumer Credit Act if you spend over £100 on goods or services, which can be useful if you’re paying for flights or accommodation and it gets cancelled or there’s a problem. This is because you can claim back the money from your card provider if there’s a dispute. However, as I always say with credit cards, pay the balance immediately or you’ll be hit with high interest. I use my credit card to pay for flights so I’m covered, after numerous issues with airlines and holiday companies being reluctant to refund over the pandemic.
Using a debit card
Paying by debit card – and withdrawing cash in particular – can be a pricy business abroad. Most of the main bank cards bill you all kinds of fees per transaction and the exchange rates are often poor.
However, ‘challenger’ or ‘digital’ banks can offer relatively cheap options for using their cards abroad. These online services often offer travel friendly cards with a bank account. The best ones don’t charge fees at all and the exchange rates can be reasonable too. You can apply online for the accounts easily and if you just want to use them abroad, all you need to do is transfer over some cash. This is a good idea if you want to take a mix of travel money but have a card available too for spending so you’re not carry a load of currency around with you.
One word of warning though. I found that contacting some of the online only banks can be difficult. In fact, only Starling does well for customer service from the complaints I’ve seen.
Finding the best exchange rate before you travel is vital. There have been a lot of currency fluctuations lately, so keep an eye on the rates. MoneySavingExpert have a great comparison tool that helps find the best rates near you.
You can usually opt to get your money in person or have it delivered. Once again, I decided to check out the firm that came top in my comparison table. The Currency Online Group are based in a rather posh office in Waterloo station. To be honest, even though it wasn’t as quick as going to a ‘old school’ currency exchange, being in a private room while my money was counted out made me feel a lot more secure about collecting the cash.
Now, I can’t make this clear enough… Do not buy currency from airports. These businesses usually have the worst rates. And many people get hit again when they return and change back money too! Always, always buy your cash in advance and do your research.
One last thing…
Just taking the time to do a bit of research on the best spending options for you can save you a fortune abroad. So prep in advance and you’ll be able to make the most of your money on holiday.
Featured in Mirror – Martyn James