With the pound continuing to weaken, here are the seven biggest currency rip-offs to watch out for - plus tips on how to make your money go further abroad.
I've recently returned from a holiday in Ireland and as lovely as it was, my bank account seemed considerably emptier by the end of it. I knew my holiday would be expensive, but I didn't realise it would be that expensive.
The current exchange rate between the pound and the euro, and the pound and the US dollar is a real blow to holidaymakers at the moment. In fact, since I've been back in the UK, the pound has fallen even further - plummeting to a five-month low against the euro last week to just 90.46p per euro! It has also sunk to a three-week low against the US dollar - to $1.62.
This means that if you're planning on jet-setting to Europe or the States any time soon, you're likely to end up paying through the nose.
If you want keep your costs down, you'll need to watch out for these seven big currency rip-offs:
1) Commission-free offers
I don't know about you, but whenever I see a sign advertising 'commission-free' currency, I can't help but think it must be a great deal. But this isn't the case at all and commission-free outlets will actually often offer a poor exchange rate to make up for this cut in their commission.
So when hunting out the best deal for your currency, make sure you take this into consideration and don't just assume that commission-free means you're getting the best deal for your money.
2) High street bank exchange rates
If you want to get the best value for your money, the first thing to do is shop around. Exchange rates, fees and charges can vary widely, so it's always a good idea to check where you can get the most for your money.
High street banks might seem like a convenient option, but unfortunately they are likely to be a lot less competitive in terms of exchange rates, when compared to currency specialists. Usually, high street alternatives like the Post Office and Marks & Spencer will offer a better rate.
It's also worth investigating online currency providers such as Travelex. In fact, Travelex offers its customers a price promise guarantee, meaning if you find a better rate on the same day - online or otherwise - it will refund the difference.
3) Airports and hotel exchange rates
Similarly, make sure you don't leave organising your travel money until the last minute. If you do, and then decide to exchange your money at the airport or at your hotel, you're likely to lose out big time. That's because airports and hotels usually offer an appalling exchange rate, and you'll probably be charged a commission fee, which will eat away at the rate you'll get even more.
4) Delivery fees
When ordering your currency, watch out for delivery fees. Some currency providers will charge a fee (as much as £5) for delivery so it's worth planning ahead and giving yourself enough time to collect your currency from a high street branch or the airport.
5) Credit card fees
When you're on holiday it can be so easy to pay for items by credit card. But you need to think carefully about how much you will be charged for doing so.
Many credit card providers charge a foreign transaction fee of around 2.75% every time you use your card to purchase something overseas. And this can make your spending much more expensive.
The best way to avoid this is to simply avoid use your credit card overseas. But if you know that's not an option, it's worth taking out a credit card that doesn't charge any foreign transaction fees when used abroad - such as the Abbey Zero card and Post Office credit card. Find out more in Top new credit card for holiday spending has a big catch.
6) Dynamic currency conversion
You should also be aware of a practice some overseas retailers and cash machines operate called 'dynamic currency conversion'.
This process offers you the choice of paying in sterling or the local currency, and can cause confusion if you're not sure how it works.
By choosing to pay in sterling, the retailer will convert your payment from local currency into sterling, instead of your card provider. But while this might seem logical - as you'll see exactly how much will be coming out of your bank account - the retailer will be the one deciding the conversion rate - and often, this rate is much worse than a bank's. So you're nearly always better off paying in the local currency.
7) ATM withdrawal fees
Judging exactly how much cash you'll need on holiday is always tricky. In fact, I don't think I've ever got it right. But if you do run out of cash and decide to withdraw money from a cash point, watch out.
Withdrawing money on your credit card is never a good idea - you'll usually be charged a fee of around 2% to 3% of the amount withdrawn, with a minimum charge of £2 to £3. Not only that, but you'll be hit with a hefty interest rate too - and there's no interest free period for cash advances so you'll be charged from day one.
However, withdrawing money on your debit card when you're on holiday can also be expensive - usually you'll be hit with a cash conversion charge of around 2.75% of the amount withdrawn, as well as a cash transaction charge of around 1.5%-2% of the amount withdrawn (with a minimum charge of around £2).
A good way to side-step these fees is to have a bank account with Nationwide. Although the Nationwide debit card had previously been fee-free, it now charges conversion and retail conversion fees of 0.84% - but these are much lower than most other cards charge, and they don't apply in the EU and certain other countries. You can find out whether they will apply to your destination with this A-Z tool.
If you don't have a bank account with Nationwide, however, try to avoid withdrawing money from an ATM as much as possible - especially small amounts.
Fight back against the falling pound
It's all very well knowing what the rip-offs are - but how to do you fight back?
Well, there are two easy ways...
1) Get a pre-paid currency card
Choosing a pre-paid currency card can also be a great alternative to a credit card or debit card because once again, you'll avoid the fees mentioned above.
Once you've chosen your card, you can pre-load your spending money before you jet off on holiday. You can load the card with Euros, US dollars or Sterling and can top it up with extra cash whenever you want.
If you fancy this option, make sure you shop around for your card as some pre-paid cards charge fees. Good cards to check out are the Travelex Cash Passport, the Caxton FX Currency Cards, the FairFX Currency Card and the Moneycorp Prepaid Currency Card. You can find out more in The very best card to take on holiday.
2) Change your holiday destination
Finally, if you're concerned about the falling pound, one of the best options is to choose a holiday destination where the pound is still strong! According to Travelex, outside the Eurozone, the Turkish Lira is one of the best value currencies, with the pound increasing in value by more than 9% compared to this time last year. Poland is also a good option, with the pound rising in value against the Polish Zloty by 6%.
And if you fancy a trip further afield, you could jet off to Mexico where the pound has increased in value against the Peso by more than 12% compared to this time last year. The pound has also increased in value against the Jamaican Dollar by more than 5%.
So if you're off on your holidays soon, here's hoping you can manage to minimise the impact of the falling pound.
Happy holidays!
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