Beat the top 10 holiday money mistakes

Overseas holidays are expensive enough without adding to the cost unnecessarily.

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There a number of financial pitfalls to watch out for, from using the wrong plastic to paying too much for your currency.

The good news is, if you do a bit of homework before you go, you can avoid the most common mistakes. Here’s the top 10.

1. Not playing your cards right

Credit and debit cards are a convenient and flexible way to pay for hotels, restaurants and gifts abroad. But if you’re not careful they can also prove expensive.

Most cards charge a foreign conversion fee for overseas transactions, which can be as high as 3%. The fee is automatically loaded onto the exchange rate, so it’s not always easy to identify.

Some cards also charge an additional ‘purchase’ fee of between £1 and £1.50 every time you spend on the card overseas. So, you might buy a £10 gift, but it will actually cost £11.50 – and that’s before the foreign exchange loading.

The only way to avoid foreign usage fees is to pick the right card. Top of the pile at the moment is the Halifax Clarity card, which has no usage fees anywhere in the world, including on ATM withdrawals (more on that below).

Another option is to take a pre-paid card that you load up with foreign currency before you travel, rather like a pay-as-you-go mobile phone.

2. Withdrawing cash from an ATM

Withdraw cash from an ATM using a debit card in the UK and it’s usually free. But travel overseas and it’s a different story.

Most cards charge their customers for foreign currency withdrawals – and the fee is typically 2% of the amount withdrawn. There’s also the foreign loading fee to consider.

Cash withdrawals on a credit card are always a no-no, even in the UK. Most firms not only charge a fee, but also a higher rate of interest on cash withdrawals than purchases.

Plus, there is no interest-free period, so you will start to rack up charges immediately. When you add in the foreign usage fee, the costs really begin to mount up. 

If you really must withdraw cash when you are abroad, you could take out a bigger amount to try to limit the number of withdrawals. But you should avoid carrying large amounts of cash around – use the hotel safe instead.

Taking sufficient currency with you is probably the best option – provided you get a decent exchange rate (again, see below) and keep your cash safe.

3. Forgetting to tell your bank

Banks and building societies look out for unusual spending patterns in a bid to combat fraud. So, if you normally use your card in the local supermarket you could trigger a security alert when you pay for hotel accommodation in Marrakesh.

It’s therefore a good idea to notify your bank before you travel abroad. If not, its security systems could block your foreign transactions, leaving you without access to funds.

4. Leaving your currency until the last minute

Many people leave sorting out their holiday money to the last minute, but it’s usually a mistake.

The exchange rates at the airport are lousy at the best of times, relative to what’s available elsewhere. And you’re clearly not going to be able to time your transaction to coincide with a favourable sterling exchange rate.

You can often get a good deal on foreign currency when you buy online. But watch out for delivery charges as a £5 fee can wipe out the benefit of a generous exchange rate.

5. Being seduced by 0% commission

Many bureaux de change these days boast 0% commission, but it doesn’t necessarily mean they offer the best foreign currency deal.

It’s just as important to check the exchange rate as zero commission on a rubbish rate will hit your pocket hard.

6. Exchanging money when you get there

If you change money while you are overseas, it’s likely to be expensive as you will probably be charged commission. So try to avoid converting your currency abroad, or limit the number of exchanges.

Remember, too, that hotels are notorious for offering poor exchange rates.

Some foreign retailers will offer to convert your bill into sterling when you pay. But so-called ‘dynamic conversion’ is best avoided as the exchange rate is usually poor.

If the shop or restaurant converts your bill automatically and refuses to reverse the transaction, take a note of its details and tell your card issuer when you get home.

7. Being bamboozled by ‘foreign money’

It’s a good idea to familiarize yourself with the local currency and its value before you set off. If not, you could end up spending a lot more than you think.

A useful tip is to calculate how much the notes are worth in sterling than you can keep an eye on your budget – and avoid getting ripped off.

8. Carrying too much cash

Everyone needs cash when they travel abroad, but it’s best not to take too much when you are out and about. Cash is easily lost or stolen and most insurance policies impose a limit on any claim for cash, which could be as low as £50.

If you’re staying in a hotel, make sure you use the safe to store your cash and valuables. This is often a requirement of a travel insurance policy. That assumes, of course, that you’ve got your insurance in place…

9. Not taking out insurance

Given all the things that could go wrong with your holiday – from needing to cancel to losing your luggage to falling sick or getting injured while you’re away – travel insurance is really a no-brainer.

And given that you can buy it through MoneySuperMarket for under £5, there’s really no need to skimp on cover.

10. Forgetting to carry an EHIC card

If you’re travelling to Europe, get yourself a European Health Insurance Card (EHIC).

This vital piece of travel kit entitles you to emergency healthcare on the same terms as a local resident – which will either mean free, or for a lot less than it would cost privately.

Some insurance policies require you and everyone in your travel party to carry EHICs (you need one each, including children). If you receive treatment through your EHIC, you won’t need to claim on your travel insurance, which will save you paying the policy excess.

A word of warning: never pay for your EHIC. The card is 100% free – simply call 0300 330 1350 or apply through the dedicated NHS webpage.

Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

 

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