Advertisement

Travellers 'wasting £1.3bn a year on fees': the best and worst ways to get money abroad

Try to reduce the amount of cash you exchange, advises Nick Trend - This content is subject to copyright.
Try to reduce the amount of cash you exchange, advises Nick Trend - This content is subject to copyright.

British holidaymakers are wasting £1.3billion a year on obvious travel money mistakes, according to one currency analyst.

FairFX has launched a campaign to warn travellers of the pitfalls when purchasing their holiday money, and claimed that just over a billion pounds is being thrown away on poor airport exchange rates and credit and debit card fees overseas. It also said £1.7billion could be saved by planning ahead and anticipating currency fluctuations and that £2.1billion in foreign coin lies dormant in homes around the UK thanks to poor planning. 

It highlights six key points to be aware of, and the amount of money each wastes across the country...

  1. Paying in pounds abroad when offered the choice - £380m

  2. Buying travel money at the airport - £92m

  3. Using ATMs abroad and paying the fees - £190m

  4. Not having fee-free credit and debit cards - £644m

  5. Wasting leftover currency - £2.1bn

  6. Not taking advantage of currency fluctuations - £1.7bn

Earlier in the month, travellers were warned of the terrible rates some bureaux de change were offering at airports in the wake of the general election (as little as €0.90). But surely this is the most obvious no-no when it comes to travel money? Airport outlets consistently offer the worst rates for British travellers. It follows the same theory as buying fast food at a festival or parasols on a beach - the customers are captive and in need and the sellers know this. Cue, a bad deal.

Sterling to euro / forex one year
Sterling to euro / forex one year

Why do people still buy their currency at airports?

Convenience is the biggest motivation. We lead such hectic lives, between kids, nine to fives and the rest, that leaving travel money to the airport often feels like the simplest option. 

The best way to enjoy this ease but mitigate the poor rates is to order ahead. All major sellers offer the option of pre-booking your currency for collection at the terminal, in return for a much more favourable exchange.

In context | How bad is the euro exchange rate?
In context | How bad is the euro exchange rate?

Ordering euros at Southampton Airport’s branch of Moneycorp, for example, just after the election earned you €0.90, but order in advance and it rose to a much more acceptable €1.12.

At Birmingham, too, where ICE was offering just €0.98 at the terminal, pre-ordering raised your return dramatically, with an exchange rate of €1.08.

What is the best way to manage your holiday money?

Avoid airport rates, for one.

Ian Strafford-Taylor, FairFX’s CEO, said some of the rates are “nothing short of extortionate” but added that one in 10 consumers still leave their travel money until the last minute.

“Planning ahead is the only way you’ll get the best value for money and have more control over the rates you get,” he said.

cheap Europe breaks
cheap Europe breaks

Telegraph Travel’s consumer expert Nick Trend advises that holidaymakers should use fee-free debit cards or pre-paid currency cards abroad as much as possible and avoid buying large amounts of cash.

Below he offers his five must-dos and don’ts.

Five top tips for managing your travel money

1. Avoid airports

Do not rely on buying currency at the airport. You are part of a captive market. Rates are rarely competitive with those available on the high street.

2. Use credit cards, but carefully

Generally, paying by credit card gives you a better rate than paying by debit card or cash. But this advice doesn’t apply if you are not able to clear the balance each month. The interest you pay on that balance will only add to your costs.

3. Consider a currency card

Get a competitive bank or currency card. The best pre-paid varieties now offer excellent value. I use the Monzo card (monzo.com) which charges no fees, offers near “perfect” exchange rates (ie you aren’t stung by the difference between a buy and sell rate) and allows you to always keep the balance in sterling without having to convert into a specific currency in advance. Alternatively the Halifax Clarity card is one of the best value credit cards for using overseas  (halifax.co.uk/travel).

Monzo's increasingly popularity has yielded a waiting list of about 20,000
Monzo's increasingly popularity has yielded a waiting list of about 20,000

4. Lean towards the local currency

If you are offered the choice between paying a card bill in sterling or the local currency, opt for the local currency. This option is being offered more and more often - both at restaurants, shops and hotels, and at cash points. It is highly unlikely that the vendor or their bank will offer you a rate on sterling which is better than you will get automatically from the card issuer.

5. Hold on to your cash

If travelling to the eurozone, or another country that you visit regularly, keep some cash in hand and take it home with you so that you have a small float to take with you next time you visit.

Whatever happened to traveller's cheques?

Once a staple in a holiday wallet, traveller's cheques are now used by fewer and fewer people, with one graph from the Federal Reserve in the US showing that usage peaked in 1995 and has been falling ever since.

According to YouGov, the pollsters (who, for what it’s worth were one of the few to most accurately predict the outcome of the general election), only 9 per cent of Britons used traveller's cheques in 2011, a figure that fell to 4 per cent in 2014, and less than 1.5 per cent by the end of last year. Over the same timeframe, use of pre-paid cards has risen from 6 per cent to 9 per cent.

Places to exchange travellers cheques are falling in number - Credit: 2008 EyesWideOpen/EyesWideOpen
Places to exchange travellers cheques are falling in number Credit: 2008 EyesWideOpen/EyesWideOpen

The main argument for traveller's cheques - back in the Nineties - was that they could be refunded if lost or stolen, were safe in that they required your signature to be used and convenient as accepted by thousands of hotels, shops and restaurants around the world.

Today, pre-paid currency cards and debit cards do much the same, without the need for carrying paper, issuing your signature at every turn and dealing with the faff of whether they are accepted or not, or finding a bank to cash them. A growth in traveller's cheque fraud helped spur a number of business into ceasing to accept them. 

Ania Walker, head of prepaid cards at Travelex told Telegraph Travel that such cheques were more useful when there were fewer ATMs and the “point of sale infrastructure was less advanced”, meaning fewer card machines and contactless apps.

“They’ve fallen out of favour in recent years,” she said. “With the increasing use of cards and apps to spend and manage money domestically, people have to expect instant service and access.

“Although traveller’s cheques are safer than carrying large amounts of cash, the process of changing them in trip can be inconvenient, especially in remote locations or at weekends.”

Best of | Travel Truths
Best of | Travel Truths

For those loyal followers, traveller's cheques are still available from Travelex, as well as the Post Office and some banks such as Lloyds and Barclays.