Your money should stretch much further if you're heading abroad this summer. The pound's up 14% on last year at $1.70, a five-year high. It's also at an 18-month high against the euro at €1.25, up 10% on last summer. But Money Saving Expert Martin Lewis is here with his top tips on how to make your cash go even further.
Just because exchange rates have been strong recently, it doesn't mean you'll gain when you go away. Here's what you need to know:
· Warning - most people waste big money on foreign money
When abroad you only want to pay for what you buy, yet by doing it the wrong way many also pay for paying too. To show you the impact, here’s how much €1,000 worth of spending costs you (rates move daily. These were all done on one day recently).
- Spend using specialist credit card: £800
- Via UK's cheapest bureau (London ‘pick up only’ rate): £804
- Change money at the Post Office: £829
- Spend on debit card from hell (40 transactions): £882
- Change at airport (Heathrow T1 Travelex, not pre-ordered): £890
· Easy way to get the BEST rates every time in every country
Most credit and debit cards add a 3% load when you spend abroad; so spend £100 of euros and it costs £103. Yet a few specialist, no annual fee, credit cards are load-free worldwide, so it only costs you £100.
This is the same near-perfect rate the banks get, smashing everything else, including top bureaux de change. Yet to make this work, ensure you always repay IN FULL, preferably by direct debit, or the interest cost dwarfs any gain you get from the better rate. For a full card rundown see Martin’s full Travel Card Best-Buys, but in brief the top pick is the Halifax Clarity card, as it has the lowest overseas charges; but do again ensure you repay in full or it’s 12.9 % representative APR.
Also be aware that if you withdraw cash, you’ll be charged interest, even if you repay IN FULL, eg, for Halifax it's c.£1 per £100 – that still beats most bureaux – but means it is better to spend on these cards than withdraw cash and spend that.
· Top overseas card if you've poorer credit
The Capital One Classic Extra card even accepts some with year-old defaults or CCJs. It's also load-free worldwide and pays 0.5% cashback on all spending - a useful double purpose (provided you repay IN FULL each month, of course).
However, as it's 34.9% representative APR and you'll be charged this (plus a fee) on cash withdrawals, just use it for in-store spending rather than taking cash out of holes in the wall abroad.
· Debit cards can be the WORST way to spend abroad
If you have a Bank of Scotland, Halifax, Lloyds, Santander, TSB, and NatWest/RBS debit card, beware, they are my overseas debit cards from hell. Not only do they add a load to exchange rates and an ATM fee, they also charge up to £1.50 each time you spend. So £5 spending can cost you £6.65.
Any other cards, including credit cards (if repaid IN FULL), are cheaper to spend on than these.
· Get the best travel CASH rates in seconds
Ignore silly sales spiel like ‘commission free’. Often the fact you don’t pay a commission just means you get a worse rate. What you need to do is just compare the total exchange eg, “If I give you £300, how many euros will I get after all charges?”
The easiest way to get the cheapest deal is to use an online travel money comparison tool – which shows the best at speed.
And never exchange your money at the airport as they know you’re a captive customer so they’ll give you the worst rates. If you are going to do it, pre-order for airport pick up to improve the rate.
· Top prepaid cards
Here, you load with cash before you travel, then use like a debit card. If you lose it, your cash is protected. You get the rate on the day you load/buy, not when you spend, so currency fluctuations may mean you get a worse deal (or better one). The best rates and fees combination is offered by Ukash - it’s a new card so I’ve limited feedback. But it has to be said with prepaid cards, unlike credit cards, there’s no fixed exchange rate in relation to the ‘spot rate’ (the perfect rate). The rate’s set by the card provider, so it can vary.
· "Do you want to pay in pounds or euros?" - SAY EUROS
When paying on a card abroad you're often asked if you want the transaction to be in pounds or the local currency. As a general rule, never pay in pounds - that means the overseas store/ bank is doing the conversion and rates are awful.