Cash, Cards or Travellers Cheques? Planning your holiday expenditure in advance can save you unnecessary costs and charges this summer. Many of us have had our holiday plans booked for sometime now. We often spend ages shopping around to find the best holiday deal, but then forget about getting the best deal when it comes to buying foreign currency.
Recent research suggests that we are being charged far more than we should for our foreign currency and purchases while on holiday.
When it comes to holiday spending there are number options open to us, from credit and debit cards, travellers cheques, and prepaid cards to good old fashioned cash. Each option has pros and cons to watch out for.
Knowing which option to use for a particular purchase will save you paying through the nose for your currency and avoiding unnecessary charges.
For a typical holiday spend of £500, shopping around to find the best deal can save as much as £35, when comparing various bank and bureau de change rates.
Here’s how it works.
Credit and Debit Cards: Using credit and debit cards to make purchases abroad offers the most convenient and hassle free method of shopping. However, beware of hidden charges which will occur with every transaction you make.
Consumer groups are concerned that major banks are using a number techniques to squeeze more money out of holidaymakers relying on their banks cards this summer.
Most card companies charge two types of fees for the use of plastic abroad. Firstly a loading fee, this is similar to a currency conversion fee, typically at 2.75%. And a second charge is added for the transaction itself.
For an average spend of £500 on holiday, people who use credit ands debit cards face additional charges of up to £20.
For larger purchases abroad, £100 or more, using a credit card is a safe option as your purchase will be protected against faults by the Consumer Credit Act, but don’t forget to pay this off as soon as you return.
ATMs: Using bank cards to withdraw money from an ATM is an expressive method of obtaining local currency. Not only does this option incur a 2.75% loading fee but most banks charge a handling fee of up to 2%.
The transaction costs of withdrawing the equivalent of £100 from an overseas ATM can be as much as £5. For some banks this charge can be even higher.
Using a credit card to make a withdrawal from an ATM should be avoided at all costs. It is the most expensive option for obtaining your cash, and interest will be charged from the date you withdraw the cash.
Travellers Cheques: Travellers cheques have been largely superseded by plastic; however they still remain the safest way to take your money abroad. If lost or stolen, travellers cheques can be replaced and unlike credit and debit cards they are not linked to your bank.
Despite their risk free value, using travellers cheques is the most time consuming option for obtaining local currency and can be equally as costly.
You are usually charged commission when you buy them, and may have to pay a further commission when cashing them at your destination.
Prepaid Cards: More recently there has been an option available on the market which allows you to combine the safety of travellers cheques with the convenience of bank cards; these are known as prepaid cards, or cash passports.
These cards require you to preload money onto the card before you travel, allowing you to use it as if it were a debit card for purchases and ATM withdrawals.
However, these cards also include a number of charges such as issue fees, loading and reloading fees as well as transaction charges. In essence you pay handsomely for this low risk, high convenience option.
Cash: Cash is an essential item on your holiday check list and it’s always handy to have a bit of local currency when you arrive. Even for an all inclusive holiday package it’s worthwhile having a bit of spending money for drinks, excursions and gifts.
For small everyday items cash is crucial as it avoids surplus charges incurred by credit and debit cards, prepaid cards and even travellers cheques.
There are several options available for obtaining cash, these include getting it from your local high street provider, changing it at the airport or waiting until you’ve arrived.
There are huge variations between different Bureau de Change providers, choosing the right supplier can save you up £35 when changing £500 into foreign currency.
Leaving it until you get to the airport or using bureaux in touristy locations is an expensive method of obtaining local currency and can leave you feeling short changed.
According the foreign currency specialist, Mark McElney, getting cash before you go on holiday is essential.
“Most people do not shop around to find the best rate of exchange for their money, leaving it until they get to the airport or choosing to rely on their bank cards. This is costing them far more than it should.”
Shopping around to find the best deal on your local high street is by far the best option when it comes to buying foreign currency. This can be done by comparing exchange rates, commission charges and the option of a buy-back service.
If you’re still unsure which operator is offering the best deal, a safe bet is to seek advice from your local foreign currency specialist.
The Best Option: According to Mark McElney of No.1 Currency, when it comes to spending holiday money, cash is still king.
“For everyday purchases on holiday, taking cash before you go will not only save time and hassle when you get there but it will actually save you money in the long run.”
“These days every hotel, apartment and villa has a security box to keep your money and passports safe, so the risk of carrying cash is greatly reduced.”
“Although taking your bank cards away with you, as an emergency back up, is advisable, good old fashioned cash remains No.1 on the holiday check list for foreign currency.”
ENDS
Issued on behalf of No.1 Currency by LLLink at Forth House, 5 Johns Place, EH6 7EL. Contact Emma Sykes on (0131) 561 8416 or emma.sykes@mediavision.co.uk
