According to The Telegraph, UK travellers spend a whopping £1.3bn a year on fees when taking out money abroad. With some careful planning, you could make your holiday cash stretch a little bit further. Here's how:
1. Check the cost of using your cards abroad
Be careful of using the same cards as you would do at home. They may be ideal for day-to-day in the UK, but they may have costly fees attached to them when used abroad. Check before you travel and if they do, you may wish to look into alternative cards that are more travel-friendly when it comes to fees.
2. Be mindful of using your credit card to take out cash abroad
You may want to be careful of doing this in the UK too, unless there’s an emergency. You’ll be charged interest straight away, on top of all the other fees. Keep an eye out for:
- ‘Foreign exchange commission’ or 'foreign loading fee' of up to 2.99% of the sum spent, which is applied every time the card is used abroad
- A cash withdrawal fee of approximately 3% (or minimum £3) when you take money out of a cash machine, as well as the foreign exchange and interest charges
- Interest charges from the moment cash is withdrawn on the card, often at rates of up to 30% APR – even if the card balance is paid off in full before the end of the month.
3. Be careful about taking out more than you need
It may be worth budgeting for what you’ll need and trying to stick to that amount. According to YourMoney.com, the average UK holidaymaker comes home with £70-worth of foreign currency. Often this money is left in a drawer and inevitably forgotten about until it becomes unusable.
4. Think about getting currency before you leave – or use a card that doesn’t charge for using it abroad
Most debit cards will charge you for using a cash machine overseas. They typically deduct up to 3% of what you take out or charge a minimum fee of £2 . Some cards also bolt on an extra flat fee, which can be up to £1.50 for every transaction.
All of these small costs seem minimal on their own but will swiftly add up. The best way to get around this is to find a card that doesn’t charge you for using it abroad.
5. Don’t leave it until the last minute
Unfortunately, convenience often comes at a price and this is usually the case with airport currency exchanges. Shopping around for the best deal before you go can broaden your options for getting the best rate for your currency. However, if you enjoy the ease of picking up your cash before you fly, you could look to order your cash in advance and then pick it up at the terminal. This may help you mitigate poor rates while still enjoying the convenience.
All major sellers offer the option of pre-booking your currency for collection at the terminal, in return for a much more favourable exchange. But it’s always worth shopping around for the best rates, and that often isn’t at the airport.
6. Tell your bank and credit card companies that you’re going away
Once you’ve decided on which cards you’re using, make sure you’ll be able to use them while abroad. Let your debit or credit card provider know where you’ll be and for how long. That not only means they shouldn’t block your card while you’re away, but they’ll also know to quickly flag its use elsewhere if it’s cloned or otherwise.
7. Consider paying in local currency – not pounds
By paying in pounds, you’re converting from the local currency into pounds using the vendor’s exchange rate – which is often more favourable to them, rather than you. We’ve covered this in more detail in a previous article you can read here.