We look at the various travel money options in our latest video '
Travel money options', but we've also compiled our top 10 tips to ensure you get the best deal on your holiday money.
Don't buy your money at the airport
The worst place to exchange money is at an airport where rates of exchange are normally much worse than even a high street retailer. Online services tend to offer the best exchange rates and you can have the money delivered to your home address.
Commission free doesn't necessarily mean best value
Many foreign currency bureaus advertise commission free deals but these aren't automatically the best deals. Exchange bureaux make their money in two ways - through commission charges (a fee added when you convert your cash); and through exchange rates. So if you're not being charged commission you could well find the exchange rate isn't as competitive - you therefore need to compare the total cost in sterling of your foreign currency purchase.
Watch out for credit card fees
Using a credit card abroad is convenient but your purchase will probably cost you more than you're expecting because most providers levy a 'loading' or 'conversion' fee of between 2.5% and 3.0% each time you use your card abroad. Not all do however, so if you're going away this summer it's well worth applying for the Abbey Zero card or Post Office Credit Card as neither charge overseas usage fees.
Check out our article 'Get a new credit card before you jet abroad' for more information.
Avoid using credit cards for cash withdrawals
Never use a credit card for withdrawing money from a cash machine. Not only will most cards levy a loading fee, you'll probably also be charged a cash withdrawal fee - usually about 2% of the amount withdrawn. In addition, cash withdrawals attract interest at a higher rate than that charged on purchases - interest is also charged from the day the withdrawal is made so even if you clear your balance in full each month, interest can't be avoided.
Even the Abbey Zero card, which doesn't levy a cash withdrawal fee, charges a higher rate for ATM withdrawals - 27.9%, compared with 18.9% for purchases.
Debit cards are better if you want to withdraw money from a cash machine while you are away. You will probably incur loading and withdrawal fees but there will be no interest to pay. Nationwide's debit card is the cheapest to use abroad - it is free to use in Europe, although from July 1 you will be charged a loading fee of 0.84% elsewhere in the world.
More is less
Traveller's cheques have become less popular with many holiday makers using cards as an alternative. However, they are still available but remember you will be charged each time you exchange them for cash so rather than taking lots of traveller's cheques worth small amounts, say £20, opt for larger denominations as it will cost you less to exchange.
Similarly, try and make as few cash withdrawals as possible - a withdrawal charge will be levied on debit cards but most banks have a minimum charge, often around £2, so numerous withdrawals for small amounts will cost you more in associated charges than a single withdrawal for a higher amount.
Credit cards offer extra security
Credit cards offer Section 75 protection - this states that if you pay for something between £100 and £30,000 on a credit card, the card's issuer is equally liable if something goes wrong. This protection applies even to purchases made overseas - something worth considering particularly if you make a large purchase when you're away.
Consider a prepaid card
Prepaid cards are safer than cash but offer the same convenience as a credit or debit card. You load money onto the card - it can then be used in the same way as any other credit or debit card. When comparing deals, check for fees and charges as these can vary. For more information read our 'Easter travel money' article.
Always pay in the local currency
If you're abroad and paying with plastic, a retailer may offer to let you pay in pounds instead of the local currency - avoid this like the plague. This is called dynamic currency conversion and the exchange rates you get from the retailer will usually be much worse than the MasterCard or Visa rates.
Mix and match to maximise your holiday money
Credit cards are the best travel money option as long as you take out a card designed for overseas use and steer clear of the hidden charges. However, to avoid being penalised, particularly for withdrawals, it makes sense to carry one of the leading prepaid cards and a small amount of foreign cash for taxi fares, coffees and other small ticket items.
Use sterling on the plane
Many airlines will offer the option of paying in the currency of the country you've just holidayed in on the plane home. This can sound a tempting option if you've got some cash left, but it's an expensive option. The airlines charge a currency exchange fee, which is not usually published in their in-flight magazine. Instead, they simply advertise the cost of items in sterling and create a mark-up price. This effectively means the airline makes money for doing nothing - while dressing this up as a service for your convenience. Paying in sterling will always be cheaper.
Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.
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