The excellent news for travellers from Britain this summer is that your money will go significantly further in many popular overseas holiday spots.
Compared with this time last year, the pound has strengthened by about nine per cent against the euro, 12 per cent against the US dollar and a whopping 24 per cent against Turkish lira.
With £1 currently worth around $1.71, sterling is at its highest value against the dollar since 2008. This is a financial boost not only if you’re heading to the US, but also to other countries whose currencies are pegged to the dollar, such as Barbados, St Lucia and the United Arab Emirates (Dubai).
Cheaper destination: Turkey (pictured) could turn out cheaper this year for holidaymakers as the pound has strengthened by a whopping 24 per cent against Turkish lira
However, the benefits of a stronger pound on our holiday spending can be whittled away by the punitive charges and less favourable exchange rates used by many banks and bureaux de change. Here’s what to watch out for, and cost-saving pointers.
GET CASH BEFORE YOU GO
If you leave sorting out your currency until you get to the airport, you’ll be throwing money away, as rates are massively cheaper if you pre-order for collection at the airport. On a spot check for £500 of euros from Moneycorp at Gatwick, pre-ordering through moneycorp.com would have provided me with €620, compared with €571 without reserving ahead – an eight per cent difference. Check whether you can get a better rate elsewhere, both for branch collection and home delivery, on travelmoneymax.com.
Boosted: Sterling is at its highest value against the dollar since 2008
DITCH RIP-OFF CREDIT CARDS
Most card providers levy a charge (often called an exchange rate loading fee) of 2.75 to 2.99 per cent when you use their plastic to pay for things abroad. That may not seem so much – but settle a £500 hotel bill, and you’re paying an extra £13.75 to £15.
However, a few card providers do not impose these loading fees on purchases, which suggests to me that the many others that do are ripping us off. The Halifax Clarity (halifax.co.uk), Capital One Classic Extra (capitalone.co.uk) and Post Office (postoffice.co.uk) credit cards are among those that do not impose this charge.
And never use your credit card to get foreign currency abroad. With almost all credit cards, you face astronomically high interest charges when you withdraw cash – from the date the withdrawal is made, and even if you pay off your bill in full each month.
DEBIT CARD DANGER
Using most debit cards means you also have to pay an exchange rate loading charge – again, typically 2.75 to 2.99 per cent. But that’s not all.
When you make a purchase, you often have to pay a further £1 to £1.50. And when you withdraw cash from an ATM, with most providers your account will be debited by an extra 1.5 or two per cent of the value of the withdrawal, with a £2 minimum charge. It’s both confusing and costly: with NatWest and RBS, to withdraw £100 you pay nearly £5 in charges.
The only saviour I am aware of is the Norwich & Peterborough Building Society Gold Classic Current Account (nandp.co.uk). Its debit card is free to use overseas – though to avoid account charges, you need to pay in at least £500 a month, or have a balance of at least £5,000. If that account isn’t for you, do try to avoid making small-value purchases or cash withdrawals with your debit card.
One further point. Watch out for ‘dynamic currency conversion’. This is when overseas retailers and ATMs invite you to pay in pounds, instead of their local currency. It may sound inviting, but often you don’t know what exchange rate will be used. So whatever debit (or credit) card you have, it’s a safer option to pay in the local currency.
TRY A CURRENCY CARD
With these relatively new cards, you upload funds at an exchange rate fixed on that day, and then withdraw money from cashpoints and pay for purchases. The cards, which can be topped up, are available from many foreign exchange specialists, travel agents and banks.
They do not come with any credit facility, some cost money to set up and have inactivity fees, and many impose charges to withdraw cash from ATMs.
However, the best euro and US dollar pre-paid cards can be good-value alternatives to credit and debit cards. Those issued by Caxton FX (caxtonfx.com), which I sometimes use, and Ukash (ukash.com) don’t have any of the above fees, and use competitive exchange rates.
Courtesy: Daily Mail Online