Five ways to get the most holiday cash

If you're jetting off abroad this summer, here's how to get the most foreign currency for your sterling.

Brits are doing some serious holiday belt-tightening, according to recent research from Tesco Personal Finance.

The study showed that a third (34%) of us are spending less on our holidays - with more than half (54%) of people surveyed cutting back on food and drink costs.

A third (33%) of respondents even said they'd be filling their suitcases with essentials like teabags and breakfast cereal in an effort to save a few pounds.

Do your holiday money research!

However, despite all the careful budgeting, there's one area of holiday finance that is still being sadly neglected: When it comes to foreign currency, we're letting the pounds slip through their fingers.

Less than half (48%) of Britons shop around for the best deal on their holiday spending money. And around a quarter (26%) go for convenience over rate.

How to find the best value foreign currency

If you're planning to spend on a credit card overseas, read New top card for holiday spending has a big catch. It highlights the pluses - and the pitfalls - of the best card for the purpose.

And if you're planning to withdraw cash from foreign ATMs, The best way to withdraw cash abroad lays out your best-value options. You may also want to watch our recent video on Pre-paid currency cards.

But what if you want to pick up foreign currency before you leave the UK? Unfortunately, the holiday money market is chock-a-block full of spin, hidden fees and sneaky charges that make it very difficult to see the wood for the trees.

But never fear. Here are my five top tips for getting the best-value deal out there:

1. Shop around!

As with all decisions related to financial products, do as much research as you possibly can. Exchange rates, fees and charges can vary widely, so don't assume everyone is offering much the same thing.

For example, the exchange rates offered by high street banks are likely to be a lot less competitive than those from currency specialists.

And often one 'brand' of currency provider (eg Thomas Cook) will offer different rates of exchange depending on whether you're dealing with a high street branch, an online transaction or an airport outlet.

2. 'Commission-free' isn't everything

When I was a teenager, I thought 'commission-free' meant you were getting the best possible deal on your foreign currency. More fool me. In fact, the lack of commission is only half of the story.

Of course, the exchange rate is also crucial. Essentially, the 'best' exchange rate will allow you to get the most foreign currency for your sterling. And very often, commission-free outlets offer poor exchange rates to make up their cut.

So - if you want the best deal, you need to pin down a combination of the best exchange rate and the lowest rate of commission.

Having said that, keep an eye out for the currency dealers who still charge high rates of commission on particular transactions. For example, many still charge a commission fee for Sterling travellers cheques - which typically adds 1% to 1.5% to their price.

3. Plan ahead

In your holiday excitement, don't leave it until the last minute to get your foreign currency. Airports and hotels are two of the worst places to change your money, because a) the exchange rate is usually appalling and b) you'll probably be hit with a commission fee as well. Arrgh!

I know that sounds obvious - but we've all done it, haven't we?

4. Dodge delivery charges

Don't make the mistake of bagging a good conversion deal, only to be walloped by a hefty delivery charge of £5+.

Instead of having the currency delivered to your home or work address, give yourself enough time to collect it from a high street branch, or from the airport.

5. Credit cards can be costly

Just when you thought you had everything covered... You also need to watch how you pay for your foreign currency.

If you use a credit card, you're likely to be charged a cash-handling fee of around 2.75% of the amount spent. So if at all possible, pay by debit card - or by cash - instead.

Where to start

As a pointer, Travelex Online usually tops the 'best value foreign currency' tables. The Travelex Online 'promise' guarantees it will offer the best overall price for your foreign currency - or refund the difference.

Marks & Spencer and the Post Office often occupy second and third place - so it's definitely worth including these three in your currency hunt.

However, the rates, deals and fees associated with holiday money are constantly changing - so it's a good idea to spread your net a little wider as well. For a list of the leading travel money providers, have a look at How to avoid holiday-money horrors.

Good luck!

More: Don't gamble with your travel insurance! | Dreaming of a new life abroad? Oh do grow up