1. Save throughout the year
Putting money aside throughout the year to spend on your holiday sounds like a very obvious tactic – yet many people fail to do it. Avoid playing catch-up for the remainder of the year by stashing cash each month in a separate ‘holiday spending’ account.
2. Don’t neglect your current account
Just because you are on holiday, your current account won’t be. Make sure you leave enough cash in your account back home to meet all standing orders and direct debits. The last thing you want to return to is a fistful of overdraft charges.
3. Shop around for the best exchange rates
On average, Britons spend a whopping £1,038 once they’ve reached their summer holiday destination, according to recent research from foreign currency dealer FairFX – yet 23% of us still fail to shop around for the most favourable exchange rates.
Usually you will find these at online currency specialists, rather than a high street bank or retailer.
Keep in mind exchange rates are separate from commission charges, so even a ‘commission-free’ provider may not cough up the most currency for your cash.
4. Avoid the airport Bureau de Change like the plague
If you don’t get organised in time to search for best rates on currency, at least avoid buying it at the airport.
According to some recent number crunching from moneysupermarket.com, the same €1,000 euros would cost a staggering £53 more to buy from the Travelex at Heathrow airport than if you ordered it in advance at OnlineFX.com. In some destinations, that’s the cost of dinner for two – with wine.
Of course, a good alternative to carrying cash is a prepaid card but, if you've left it too late to pick up a new prepaid or credit card, then it's best to order your currency onlune and pick it up at the airport. You get the better online rates but you have the convenience of collecting it just before you fly.
5. Use a prepaid card
By far the most effective means of keeping your spending money within budget is to load up your set allowance in advance on a prepaid card. These can be used in exactly the same way as credit or debit cards, are safer than carrying cash and can also work out a lot cheaper.
For worldwide travel, top of the prepaid card tables is the Caxton Global Traveller card. There is no monthly charge, no application fee or overseas charge for cash withdrawals and a flat exchange rate of 2.5% applies.
Travellers within Europe could also consider the FairFX Euro Currency Card Special, which has no monthly fees and gives moneysupermarket.com customers a £5 bonus when they load more than £500 onto the card. Although there’s no charge for purchases, you do pay €1.50 euros to withdraw money from ATMs.
Alternatively, the Escape Travel Money Euro Card is free to use, including withdrawals from international ATMs, with a €2 euros charge for using UK cash machines. This card costs £9.99 to apply for, but you receive that back once you load at least £100 onto it.
6. Carry the right credit card
As soon as you arrive at your overseas destination, your trusty credit card can suddenly morph into an arch enemy. That’s because every time you use your plastic abroad the provider will charge a conversion fee of between 2.5% and 3%.
The good news is some providers don’t. The Post Office Platinum Credit Card, The Santander Zero card and – if you are aged over 50 – the Saga credit card do not charge fees for spending anywhere in the world. You’ll pay an annual percentage rate (APR) of 16.9% on the Post Office card and 18.9% on the Santander, while those qualifying for the Saga offering will pay a competitive 11.9% on their purchases, plus enjoy nine months interest-free purchases.
Another option, particularly if you’re just travelling within Europe, is the Nationwide Gold Card, which charges 16.9%. There are no fees for EU spending and you pay 1% for purchases made elsewhere in the world.
7. Avoid ATMs if you can
Your debit card will also take on a new guise as soon as it hits foreign shores, incurring hefty fees just to withdraw cash from an ATM. Costs vary so find out what your bank charges before you set off.
For example, withdrawing €1,000 euros in 10 visits to the ATM would cost £817.76 with Nationwide’s leading FlexAccount, compared to £860.25 with NatWest’s Current Plus Account.
Cash withdrawals on credit cards are more expensive still and should be avoided at all costs. Credit card providers charge a loading fee as well as a cash withdrawal fee of around 2% of the amount withdrawn. Interest on cash withdrawals will also be charged at a much higher rate than on purchases.
8. Get clever with your prepaid loading
Global prepaid cards load up in Sterling as the provider doesn’t know which currency you will be using. But, if you are going to stick to spending in either euros or dollars, choose a prepaid card in that particular currency.
Not only is it cheaper but it’s easier to keep track of what you are spending when it’s in the same currency as the prices you are looking at.
9. Play your cards right with currency choices
When you are making a purchase with your plastic abroad, you will sometimes be given the option of paying in pounds instead of the local currency. Decline!
This is known as ‘dynamic currency conversion’ which, in simple terms, means you will be given the retailer’s own exchange rate rather than the one offered by MasterCard or Visa – and it will be much less favourable.
10. Use sterling on the plane
Keep up your savvy holiday spending all the way back to British soil. When making duty-free purchases on the homeward bound flight, you will usually be given the option of paying in the currency of the country you have left behind.
While this may seem like a good chance to use spare cash, it’s an expensive option. Airlines charge their own currency exchange fee which it will factor into the cost of the item upfront. If you're on a British airline then paying in sterling is always likely to be cheaper, although bear in mind that European carriers like Ryanair use euros and so you're better off paying in that currency.