Buy foreign currency in advance
It's always worth taking a bit of cash with you, so take the time to shop around for foreign currency in advance. The most competitive deals are usually found online, and collecting your money from the foreign exchange bureau will be cheaper than having it delivered.
If you prefer to have your currency delivered, compare delivery fees carefully as they can vary depending on the amount of money you're ordering.
Many companies also charge a commission to exchange sterling into foreign currency, so be sure to factor that in when you're comparing costs. In some cases, you may be offered a commission-free exchange, but be aware the exchange rates may not be as competitive.
Whatever you do, don't leave buying your foreign currency until you get to the airport as you will pay inflated exchange rates and commissions.
If you have left it a bit late, you can still save money by pre-ordering it for collection at the airport. Travelex, for example, will allow you to pre-order your currency just four hours before picking it up at the airport desk.
Use the right credit card
Taking a debit or credit card with you can be a good choice if you don't want to carry around stacks of cash on holiday. But use the wrong one and you could get caught out by expensive fees.
Many cards will charge a foreign exchange fee for overseas use. Often this is around 2.75% to 2.99%, so for every £100 you spend, you could be charged £2.75 to £2.99.
On top of that, if you use your credit card to withdraw cash (known as a cash advance), you could be charged another fee of around 2.99%, plus interest from the moment you take out your money, even if you pay off your balance in full that month.
Interest for cash advances is usually high, at around 27% APR representative, so avoid withdrawing cash on your credit card if you can.
If you do want to take plastic with you, look for a card that's specifically designed for overseas use.
The Halifax Online Clarity credit card, for example, won't charge you for foreign transactions or cash withdrawals anywhere in the world. However, you will be charged interest at a rate of 18.95% pa (variable) if you don't clear your balance each month, and from the moment you withdraw cash from a machine. The card has a representative rate of 18.9% APR (variable)*.
Similarly, the Santander Zero credit card doesn't charge foreign transaction fees on purchases or cash withdrawals abroad when made in the local currency. You'll also get interest-free purchases for one month, but after that you'll be charged 18.9% pa (variable).
You'll also be charged this rate of interest on cash withdrawals. The card has a representative rate of 18.9% APR (variable)**.
Consider a prepaid card
Another option is to use a prepaid card when you're away.
With this type of card, you pre-load it with a cash amount before you set off (you can top it up with further funds later if necessary) and you can then use it in the same way as a debit or credit card.
Although you may still be charged fees, prepaid cards are often cheaper to use than a standard debit or credit card. What's more, they are ideal if you're on a budget as you can only spend what's on the card.
They can also be a good choice if you're worried about being accepted when you apply for a credit card as there are usually no credit checks (the provider may still carry out an identity check).
Typically, prepaid currency cards can be loaded with sterling, euros or US dollars. If you opt for one that can be pre-loaded with sterling, your money will be exchanged into the local currency when you use your card abroad.
With the FairFX euro and US dollar cards, there are no transaction fees provided they are used in the correct currency, but there is a €1.50/€2 ATM fee.
With the Everywhere card, you'll be charged a 1.4% transaction fee when you use it outside the UK, as well as a £1 ATM fee, but remember this is still cheaper than many standard cards.
In addition, new customers applying for either a FairFX euro or US dollar card through MoneySuperMarket will receive £25 when loading £500 or more onto the card.
If you apply for the Everywhere card through MoneySuperMarket, you'll receive £5 when loading £500 or more onto the card, or £26 when loading £1,000 or more. T&Cs apply.
Caxton FX, on the other hand, offers one card that can be pre-loaded in euros, US dollars or sterling, or any other available currency. There are no foreign transaction or cash withdrawal fees when the card is used overseas.
New customers applying through MoneySuperMarket will receive £25 cashback when loading over £500. Note that this offer is only valid for 30 days after registration and T&Cs apply.
*Representative Example: If you spend £1,200 at a purchase interest rate of 18.95% p.a. (variable) your representative rate will be 18.9% APR (variable).
** Representative Example: If you spend £1,200 at a purchase interest rate of 18.9% p.a. (variable) your representative rate will be 18.9% APR (variable).