The summer holiday season is now under way. It promises to be a summer of chaos, with cancelled flights strikes on the railways, and surging driving costs.
But if all that does not put you off, and you do manage to get away for your fun in the sun, the cost of living crisis will be coming along with you.
It all means that it is even more important than ever to manage your money wisely abroad.
Is cash king?
Getting the local currency used to be part of the build up to holiday travel. The adoption of the Euro by the most popular holiday destinations has made things a lot simpler, if rather less fun.
You can simply buy your Euros at the airport on the way out – but you may benefit by planning ahead.
Airport bureaux de change generally offer the least competitive rates, because people using them have few other choices. So be sure to buy your foreign currency in advance. Your bank can probably help, but you might get a better deal online. Shop around, and if you do buy online check that you are dealing with a genuine provider.
But many more of us are going cashless at home, and we might want to do the same abroad. A few small notes might be enough for tips, avoiding the risk of carrying too much cash which can get lost or stolen, and we can use our plastic for the rest.
But simply using your usual card, and forgetting all about changing money, might mean a nasty shock when the bills come in.
There may be substantial fees when using your plastic abroad. These will vary with your card provider, but can include foreign exchange commission or foreign loading fees.
The exchange rate offered by cash machines will probably be even higher than the one offered by your credit or debit card provider.
It is almost always best to pay in the local currency whether or not you use a card. If you decide to pay in sterling, you are at the mercy of the retailer who may use any exchange rate they like and can charge a fee on top.
The solution? There are actually several.
Use a prepaid travel card. These let you load your card up with the foreign currency you need and spend like a local. There is no need to worry about running out of cash - you can transfer more money online while you are on holiday should you need to. Prepaid card providers usually use the interbank exchange rate – the rate at which banks transfer money to each other - with an extra fee on top.
Wise and Easy FX may be worth looking at.
But beware. Prepaid travel cards may not be accepted for car hire or petrol purchases, so you should carry another card if you are driving.
Take out a fee-free debit card. A debit card, linked to your UK current account would usually leave you at the mercy of whatever fees your bank chose to charge. However, there are some banks offering cards which you can use abroad without fees. Cards from Cumberland Building Society, up and coming challenger bank Monzo and mobile-only bank Starling, both offer fee-free transactions and cash withdrawals anywhere in the world..
If you are searching for travel-friendly debit or credit cards, look for those which allow free cash withdrawals abroad and don’t charge for transactions or extra commission on the exchange rate.
Use a dedicated credit card. A typical credit card means a non-sterling transaction fee, a non-sterling cash fee and cash withdrawal interest. However, some cards waive the non-sterling transaction fee and the cash charges. If you avoid cash withdrawals, which all mean high interest rates, using a suitable credit card could also help you spread the cost of your holiday.
The Barclaycard Reward Visa has no fees on spending abroad or on cash withdrawals, and you get 0.25% cashback on purchases.
Enjoy your holiday
With a little preparation, you can find managing your money when you’re away is much easier.
At Continuum, we aim to help you make managing your money easier all year round.
Enjoy your holiday – and get in touch with us when you get back.
The information contained in this article is based on the opinion of Continuum The Financial Conduct Authority does not regulate personal finance.
