Holiday money

Spending abroad: Our top money-saving tips

Get the most out of your travel money by setting a budget and planning ahead.

Holidays are something we all look forward to, but to avoid losing out on a whole load of cash, avoid waiting until the last minute to exchange your foreign currency at the airport.

Instead, find out what the best options are for you, from traveller’s cheques to credit cards.

Currency exchange

This is the amount of foreign currency you get in return for your money, which will depend on the exchange rate being offered by the convertor. The higher the exchange rate, the more foreign currency you’ll get for your money.

Top tip: Lock in the best exchange rate by buying your travel money when the rate is at a high point.

Credit cards

A travel credit card abroad works just like it does back home. You have a cash allowance on the card and will be able to purchase goods and services much like you would with a debit card. But once you reach the limit of your credit card allowance you’ll have to pay off the debt to continue using it.

Advantages

  • Great exchange rates.
  • Your credit card score could improve.
  • More secure than cash – when stolen you can simply contact the issuer to block the card.

Drawbacks

  • You may have to pay foreign usage charges.
  • When withdrawing cash from an ATM with a credit card, you’re likely to be charged with interest and your credit score could suffer.
  • You may be charged 3% of the amount you spend through your credit card.

Prepaid cards

Prepaid cards are topped up with money in advance and used like a regular payment card abroad. These make sure you won’t be fined for foreign money exchange fees as you would with certain credit cards.

Prepaid cards lock the currency exchange rate on the day you load your card, not when you use it in a transaction so it’s worth keeping an eye on the current rate and buy your prepaid cards when the money exchange rate is high.

You’ll find certain currency exchange offices don’t accept these so it’s best to make sure your country of destination still makes use of them.

Advantages

  • Prepaid cards are one of the cheapest options for spending abroad.
  • Make it easier to track your spending and keep to a budget.

Drawbacks

  • There might be an application fee when you first apply for the card.
  • You could also be charged a fee every time you top up the card, which is typically around 3% of the amount you’re loading onto it.
  • You might be charged if you don’t use the card for a number of months.
  • Some cards still charge a fee when you carry out a transaction overseas.

Traveller’s cheques

Traveller’s cheques are on the decline as fewer stores and services accept this form of payment. But, you’ll still be able to buy these from select currency exchange offices and post offices.

Once you order your cheques, you’ll need to sign these and assign a set amount to each. Traveller’s cheques work like regular cheques, by filling in the details of the person/institution you’re paying to and countersigning.

Advantages

  • Traveller’s cheques are one of the safest ways to travel with money.
  • You can refund the value if it’s lost or left unused.

Drawbacks

  • You’re likely to be charged commission and an exchange rate is applied when you convert them into local currency.
  • There will be a flat fee for converting your cheques into currency.

When should you buy your holiday money?

The earlier you sort out your travel money, the more time you have to compare the best exchange rates and benefit from the best deals through currency comparison.

Giving yourself a few weeks means you won’t be stuck with a bad money exchange rate as you could be when purchasing your holiday money last-minute at the airport.

How much travel money can you buy?

Currency exchange offices provide their own restrictions. This may also be different depending on how you’re buying the travel money, e.g. online or in person at the post office.

Usually when ordering money online, the maximum you can purchase is £7,500. However, you’ll be unable to travel with more than €10,000 (or equivalent) in cash unless you declare this to customs.

Things to consider

  • Your existing bank account may have a good deal on overseas debit card use so check what you’re already eligible for.
  • It’s best to load your prepaid card with a debit rather than a credit card to avoid fees.
  • Always pay in the local currency when offered the choice as you may pay for the dynamic conversion.
  • Foreign exchange companies tend to charge a commission for conversion, which you need to factor in when comparing.
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