Five Tips To Fight The Rising Euro!

The pound hit a new all-time-low against the euro last week, but that doesn't mean you have to lose out. Here are five tips to ensure sterling's slump doesn't leave you completely out of pocket.

I'm going skiing in Europe early next year. It's my first time on the slopes, and I'm very excited. But apart from worrying over the price of my ski gear and working out a way to fall flat on my face in style, I now have another worry:

Sterling is going down the toilet.

Earlier this week, the pound hit an all-time-low against the euro - dipping below _1.12 at one point. According to foreign exchange specialist Travelex, while this time last year £1 would have bought _1.36, last Wednesday, tourist rates for that same £1 were just _1.10, and falling.

Sterling was pushed lower after figures from the Confederation of British Industry painted a gloomy picture of UK manufacturing. As the dismal outlook continues, investors are exiting sterling in favour of perceived safer havens such as the dollar and euro.

Although Europe will far from escape the slowdown, it is less burdened by debt than we are, which makes the currency more attractive to investors.

In fact, some currency analysts are speculating that the situation is so dire that by the end of this year or early next, we may be headed for euro parity, where one pound buys just one euro.

Alternatives to the euro?

Back in October, I highlighted the countries where sterling was still strong, despite the recent downturn.

Iceland was, and still is the top holiday destination when it comes to battered currencies, with Australia and New Zealand also nearing the top of the list.

South Africa is also proving a good bet, and although the rand has strengthened against the pound since I wrote the article (£1 bought 18.5 rand in October, and buys 15 rand now), you can still get more for your money now than at the start of the year.

However, if, like me your travel arrangements are already booked, Travelex has come up with five ways you can beat the currency blues:

1.) Plan Ahead

This may be simple advice, but planning where you're going to get your holiday cash can mean the difference between a good deal and getting ripped-off. After all, a great rate is very important, but when you have to pay an extra £5 to have the currency delivered to your home, are you really getting that good a deal?

Solutions come in many forms. For example, Travelex offers its customers a price promise guarantee, meaning if you find a better rate on the same day -- online or otherwise, they will refund you the difference.

Alternatively, you could try to negotiate the exchange rate directly with the retailer. Obviously, haggling with the man behind the counter in Marks and Spencer will probably result in more embarrassment than good, but smaller foreign exchange establishments usually provide scope for negotiation, especially if you're planning to change higher amounts.

I have done this a couple of times, and managed to bag a better rate through my negotiating skills. After all, there's no harm in asking.

2.) Be careful with your credit card

When used right, I think credit cards offer some great benefits. However, Travelex warns that many holidaymakers overspend when they take their credit cards with them on holiday.

The nastiest sting in the credit card tail is the 2% to 3% `foreign transaction fee' many add on to your purchases, making your initial spend a lot more expensive.

However, the Post Office, Nationwide, Thomas Cook and Saga credit cards don't charge any foreign transaction fees when used abroad. If you regularly travel overseas, I would highly recommend getting one of these cards, so you'll never have to pay more for your purchases than the cost of the item.

In addition, Fools should be aware of a little known practice some overseas retailers and cash machines operate called `dynamic currency conversion'. This is when a retailer uses its own change rate to give you the option of paying in sterling, as opposed to the local currency.

This may seem convenient but should always be avoided, as the rate the retailer will give you is almost always less competitive than your bank. You can read more about this practice in Be Careful With Your Credit Card Overseas.

3.) Watch out for commission free offers

Everybody likes the word free, and signs such as 0% and no commission are likely to part some punters of their money without much further thought.

However, look at the rate you're getting before you part with your cash, as well as other charges such as postage fees. In addition, I would never get my foreign currency from a high street bank, as the rates you'll receive are likely to be much less competitive than a currency specialist.

4.) Limit withdrawals from ATM machines abroad

Unless you're lucky enough to bank with Nationwide, your will probably be slapped with extra fees every time to take cash out from an ATM abroad. In fact, the charges don't stop there, and many banks extend these fees to both debit and credit card purchases too (see above).

Just so you can see how much withdrawals from ATMs can cost you in extra charges, here's a table of the big four's charges while abroad.

As you can see, withdrawing money from an ATM abroad comes at a price, and for every £100 you take out, you'll be charged at least £2, plus a foreign exchange fee.

So it's more cost effective to take out large amounts and use the ATMs abroad less.

If you do run out of money, charging your purchases onto your debit or credit card instead of taking the cash from an ATM could also work out cheaper.

Lloyds or NatWest are among the worst offenders when it comes to debit cards. If you have a debit card with either of these banks, you will incur an additional flat fee of £1 and £1.25 respectively, every time you make a purchase on your card abroad. Beware.

5.) Be careful about exchanging currency at hotels

.or at the airport for that matter. The rates you'll get are so uncompetitive that exchanging your money at your hotel or the airport is likely to leave you short-changed.

Airports and hotels may also charge commission on your cash, which will eat away at the rate you'll get even more. To avoid more stings at the airport, read this excellent article by Serena Cowdy, with some handy hints on how to dodge those airport swindles.

Personally, I think it will take nothing short of divine intervention to stop sterling's continued slump. If, like me, you're going away soon, you may even want to purchase your currency now. In the mean time however, hopefully these small steps will help to cushion the euro blow.

More: How To Cut The Cost Of Your Ski Holiday / How To Get Cheaper Train Travel