Britain’s residents spend billions of pounds abroad every year, but it can be difficult to know how to make the pound go as far as possible.
Now that summer is fast approaching, so are the opportunities to go on holiday. That’s why the Money team spoke to travel experts to find out when, where and how you can pay abroad.
CREDIT CARD
“The The cheapest way to spend money abroad is often on plasticif you have the right plastic,” says James Jones, head of consumer affairs at Experian.
“Using credit and debit cards can be a great way to get the very best exchange rates.”
He said the rates offered by exchange houses are generally “much less attractive” than the rates offered on some cards, which are much closer to the rates charged by the banks themselves.
Fees can offset any gains
But it’s essential to be aware of things like non-sterling transaction fees, cash withdrawal fees and credit card interest.
So find a travel rewards card, Mr. Jones said, and do it before your trip.
“You should probably give yourself six weeks.”
Extra protection
If you book a trip between £100 and £30,000, try paying for part of it by credit card to get “extra protection” under section 75 of the Consumer Credit Act, Mr Jones said.
This means that the card provider is jointly responsible with the retailer if something goes wrong, for example if you arrive at a hotel and discover that it is closed.
If you use a credit card, make sure you can pay it off in full to avoid interest charges, says Sean Tipton of the Association of British Travel Agents (ABTA).
One pitfall you should not fall into
An increasingly common pitfall when paying by card (credit or debit) is that you are given the option to pay in the local currency or in pounds, Mr Jones and Mr Tipton said.
Although paying in British pounds “seems like a wonderful convenience”, you will end up paying “quite a bit more for the purchase”, Mr Jones said.
If you pay in pounds, the local retailer’s bank will set the exchange rate, but if you pay in local currency, your UK bank will set the rate.
PAYMENT CARDS
“Some service providers do not charge fees for use abroad on their regular UK debit cards,” says Moneyfacts, but you should always check this as some charge high fees.
Alternatively, “some service providers offer specialist travel payment cards that do not charge non-sterling transaction fees and cash withdrawal fees”.
PREPAID TRAVEL TICKETS
If you want to avoid a credit check, prepaid cards can be loaded with multiple currencies and work like a debit card, without being connected to your bank.
“Typically, prepaid travel cards offer competitive or even no fees for overseas use, which can make them a cheaper alternative to using a regular credit or debit card while on holiday,” says MoneyFacts.
One of the most popular prepaid cards, Revolut, uses its own exchange rates, which may not always be the best you can find – and while the card is free on weekdays, you will be charged on weekends, so do your research.
Also note: prepaid cards do not offer purchase protection like a credit card and are not regulated by the Financial Conduct Authority.
CASH
“Don’t just rely on a map; it could backfire on you if you do,” Mr Tipton said.
Some taxis only take cash, so you will be charged high fees if you withdraw money from an ATM.
In some countries, such as Argentina, it can be difficult to get money from ATMs without a local bank account, Tipton said.
Mr Jones added: “If you’re in a very remote part of the world where there really aren’t many ATMs and where cash may be predominant, then that could dictate what you need to do.”
Where and when you can get cash
“I would highly recommend it [to] make money in Britain,” Mr Tipton said.
In some developing countries, it can be difficult to find a currency exchange, and ATMs across the board have “started introducing quite high fees,” he said.
The exceptions are countries with very high inflation rates, where it may make more sense to get cash when you arrive, he added.
When to change money really depends on the destination, says Laura Plunkett, head of travel money at the Post Office.
“Exchange rates change often, so if you have time, do your homework and lock in a rate if it’s right.”
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What is a good exchange rate for Europe?
About 80% of British holidays abroad take place in the eurozone, Tipton said.
The rate has remained “fairly stable”, but if you see the pound rising in value, that could be the time to buy a larger amount of euros a few years ahead, he added.
Mr Tipton said 1.2 per pound is a “reasonably healthy” time to buy, but “it’s a bit of a lottery”.
Every year the pound strengthens against the South African rand, and the same goes for Argentina, where the peso is “incredibly weak”, Mr Tipton suggested.
In store or online?
“Most online suppliers will insist on a minimum order value which may be too high for some people, and you will need to make sure you are home when it is delivered,” says Ms Plunkett.
“But normally the rates are better online if that’s an option for you.”