Money Mensch: How to go further with your holiday cash
Your money should stretch much further if you're heading to dollar destinations this summer. The pound is up 14 per cent on last year at $1.70, a five-year high. It's also at an 18-month high against the euro, at €1.25 - 10 per cent up on last summer. Yet, just because the rate is strong doesn't mean you'll gain. Here's what you need to know:
1. Don't waste big money on foreign money. Ultimately, when abroad you only want to pay for what you buy, yet by doing it the wrong way many also pay for paying, too. To demonstrate the impact here's how much €1,000 in spending costs you (rates move daily so these were all done on one recent day). Spend using specialist credit card: £800 (see point 2); via UK's cheapest bureau: £804 (see point 5); change money at the Post Office: £829; spend on debit card from hell (40 transactions): £882 (see point 4); change at airport: £890 (see point 9).
2. There is an easy way to get the best rates in every country. Most credit and debit cards add a three per cent load when you spend abroad, so spend £100 in euros and it costs £103. Yet a few specialist, no annual fee credit cards are load-free worldwide, so it just costs the £100. This is the same near-perfect rate the banks get, smashing everything else, including top bureaux de change. Yet to make this work, ensure you always repay in full or the interest cost dwarfs any gain from the better rate. The top pick is the www.halifax.co.uk card, as it has the lowest overseas charges. Yet other load-free credit cards include Saga, the Post Office, and Nationwide Select. For a full card rundown see www.mse.me/travelcards. Be aware that it is better to spend on these cards than withdraw cash.
3. Getting the top overseas card if you've poorer credit. The only way to know if you'll be accepted is to apply, then they credit check, but that leaves a footprint on your file. So it's worth finding out first which cards are most likely to accept you - www.moneysavingexpert.com/OverseasEligibility is a free tool which shows your odds for each card. Within it is the www.capitalone.co.uk Classic Extra, which accepts even some with year-old defaults. It's also load-free worldwide and pays 0.5 per cent cashback on all spending - a useful double purpose (provided you repay in full each month). However, as it's 34.9 per cent representative APR and you'll be charged this (plus a fee) on cash withdrawals even if you repay, in full, just use it for in-store spending rather than cash.
4. Debit cards can be the worst way to spend abroad. If you have a Bank of Scotland, Halifax, Lloyds, Santander, TSB, or NatWest/RBS card, beware. They are my overseas "Debit Cards from Hell". Not only do they add a load to exchange rates, and an ATM fee, they also charge up to £1.50 each time you spend.
5. Get the best travel cash rates in seconds. My www.TravelMoneyMax.com travel money comparison tool compares rates at about 40 online bureaux.
6. Find a top pre-paid card. Here, you load with cash before you travel, then use like a debit card. If you lose it, your cash is protected. You get the rate on the day you load/buy, not when you spend, so currency fluctuations may mean you get a worse deal.
7. If asked "Do you want to pay in pounds or euros?" answer euros. When paying on a card abroad, you're often asked if you want the transaction to be in pounds or the local currency. As a general rule, never pay in pounds. That means the overseas store/bank is doing the conversion and rates are awful.
8. The cheapest debit card abroad. I prefer cheap credit cards, as it's a big schlep to change your bank just for cheap spending abroad. Yet if that's what you want, the www.nandp.co.uk Gold Classic current account is the only load-free worldwide debit card (Metro Bank added non-European loading in March, and it has no ATM fees. You'll need a minimum £5,000 in it, or pay in £500 a month, or there's a £5 monthly fee.
9. Don't change your cash at the airport (or at least order ahead). Airport and ferry port rates are usually dismal. Far better to use www.TravelMoneyMax.com.