Anyone with a trip on the horizon is likely to make a checklist of essentials to pack, but what about spending money? Holiday cash is often last on the list even though leaving it to the last minute can be a costly mistake. Not only could you miss out on a decent exchange rate, but taking only a little cash abroad may mean having to resort to a debit or credit card when funds dry up – with all the fees that entails.
Less cash to spend abroad due to exchange rates
Holidaymakers could be in for a shock when they realise their travel cash will not go as far as before. Last year, buying £200 of Euros meant getting €252 (in 2015 that was €274). But now it’s more likely you’ll receive €236 – that’s a loss of €38 compared to two years ago. While the dollar rate has risen slightly since the end of April, it’s still down on years gone by, as £200 will get you $259 now, instead of $288 a year ago and $308 two years ago. This means holidaymakers have lost out on $49 compared to 2015 due to the weakened pound.
It’s worth taking the time to compare different travel money suppliers to maximise what you can get, and be careful of limits dampening your exchange rate. For example, Post Office Money pays a lower rate if you exchange less than £500, while Debenhams is offering a free £5 voucher on a £20 spend in store when you buy travel money. Just remember to compare the exchange rate on these offers to regular alternatives as the deals with the best incentives may not pay the best rates. Cash isn’t stretching as far as it used to, so travellers need to be sure they aren’t wasting cash elsewhere either, such as by using their credit or debit card abroad.
The convenience of plastic can come at a price
Cash isn’t always king: there’s the danger of running out in emergencies, or losing it. Debit or credit cards and even prepaid cards can make it simpler for people to track their spending, and they can be more secure than carrying around bundles of cash. The only downside is when cards charge for use.
While cards are certainly convenient and consumers get protection from theft when using the plastic abroad, some debit and credit cards will charge eye-watering fees for each withdrawal, so convenience costs. Indeed, a typical debit card can charge as much as £9.50* for a £200 cash withdrawal abroad, while a typical credit card can charge £11.96** for the same transaction – a crazy expense when fee-free cards specifically designed for use abroad are available. Holidaymakers would be wise to avoid these pricey withdrawal fees and instead consider a much more cost-effective card, particularly if they are frequent travellers.
Creation Financial Services and Halifax have credit cards that charge absolutely no fees when used overseas. Meanwhile, Nationwide’s FlexPlus debit card allows free cash withdrawals worldwide, while Metro Bank’s current account debit card is free to use to take out cash in Europe.
| Credit Card | Debit Card | Prepaid Card (Euros) | |
| Top deals for withdrawing cash abroad | Creation Everyday Credit Card MasterCard | Nationwide FlexPlus | Ice Travellers Cashcard |
Why not budget and use a prepaid instead?
Consumers hoping to budget their expenses could also consider a prepaid card, as it works like a bank account in the sense that you can only spend what’s loaded onto it. If the card is lost, it can be replaced without any loss of money. There are even prepaid cards that do not charge for ATM cash withdrawals, such as the Ice Travellers Cashcard, ideal if shoppers find themselves in a store that doesn’t take card payments. The card comes with a small £4.75 issue fee for lower loadings, but it can pay 1.5 per cent cashback on £50 spends, so it might be handy to pack a prepaid card for your next holiday. Whatever you choose, try to avoid the ‘convenience’ of using your everyday card, as this will likely cost you.
Rachel Springall is a Finance Expert at Moneyfacts.co.uk
*Typical debit card example is the NatWest Select Account, which charges a transaction fee of 2.00 per cent and a conversion fee of 2.75 per cent on cash withdrawals.
**Typical credit card example is the HSBC Credit Card Visa, which charges a 2.99 per cent usage fee and a 2.99 per cent cash withdrawal fee.
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