The value of the pound fell rapidly. Since the start of the year, the British pound has fallen 15% against the US dollar, from $1.35 to $1.15. The drop is exactly the same against other currencies that are locked to the US dollar, including UAE dirhams and currencies from many Caribbean islands.
The pound has also lost ground against the euro and almost every other currency, so it’s essential to avoid further losses by managing your holiday finances well. If you leave holiday money at the last minute and change money at the airport on your way out, you will be wasting money that would be much better spent at your destination.
Pay with a card – physical or on your phone
The Covid-19 pandemic has accelerated the movement towards plastic payments abroad, which are very often contactless. In a time when cards are used for the most minor transactions, it’s important to know how much your issuer will change for overseas use.
Be aware that card issuers typically charge an “exchange rate load” fee of up to 3% of a transaction made overseas. Check your card provider’s policy and, if necessary, obtain a new card specifically for use abroad.
Lesser value transactions are covered by voluntary “chargeback” agreements provided by Mastercard and Visa, which also apply to debit cards.
The Halifax Clarity credit card is the most common card that does not add transaction fees. Revolut and Monzo cards offer online banking with physical cards and exceptionally good exchange rate policies, as well as a number of overseas cash withdrawals. Starling and Metro Bank also offer foreign transactions free of charge.
Credit cards are generally better than debit cards. Cards issued in the UK are covered by Section 75 of the Consumer Credit Act 1974, which makes the card provider jointly liable with the merchant for any purchase over £100. This means that the goods must be of reasonable quality. You are also protected against the financial failure of a tour operator, whether it is an airline, a tour operator or a hotel.
Most debit cards are best seen as a safety net, as they usually add a flat transaction fee (around £1.25) to the exchange fee. Pay a €30 lunch bill with a debit card and you’ll pay a £2 card fee.
UK consumers have become accustomed to the general rule that paying by credit card should not cost more than paying in cash. In fact, some countries have their own laws, such as Denmark (where foreign credit card holders regularly pay a surcharge) and Australia (where hotels add an additional percentage).
Beware of Dynamic Currency Conversion
“Do you want to pay in pounds sterling?” asks the waiter innocently. He hopes that you will choose books, thereby increasing the profits of the restaurant. Dynamic Currency Conversion (DCC) means that the merchant and a bank offer you a terrible exchange rate and split the profits – usually a 5-6% margin – between them.
Restaurants, shops and hotels are allowed to offer the “opportunity” as long as they clearly state that the cardholder has a choice and quote the exchange rate that will be used.
The European Consumer Organization, known as BEUC, adds: “It is nearly impossible for a consumer to make an informed decision when presenting with the DCC option, due to the various ‘nudge’ strategies » put in place by DCC service providers and merchants. »
Always choose to pay in local currency, not “GBP”.
Beware of the “hold” on a credit card
All kinds of businesses, from car rental companies to minibar-conscious hoteliers, require a credit card. Without it, you might be asked for a large cash deposit – or simply denied service. This is because the company wants a return and reserves the right to extract additional funds.
If, after checking in the car or checking out of the hotel, they see that you’ve accrued a charge, they want to claim it – and the easiest way to do that is to require a “pre-authorization” until Un certain amount.
They will exercise a ‘hold’, which means setting aside some capacity – perhaps up to £1,000 – in your account for contingencies.
This money won’t leave your account (unless there’s been some stupidity on your part), but it limits your financial freedom.
These are cards that you load with money – usually pounds sterling, euros or dollars – and use to pay for goods and services, or to withdraw cash from ATMs. On longer trips, you can continue to top them up online from your bank account, making them a good choice for globe-trotting tourists and gap-year adventurers. But do your homework.
- The key things you need to compare start with the initial fees. Some providers waive this, but often compensate with higher fees elsewhere. Paying fees now may actually save you more in the long run.
- Next, do you have to pay a “loading” fee to put money on the card? If so, it could be costly. Some companies require 3% of all the money you put in your account.
- Is there a flat rate or percentage for using the thing?
- Finally, how quickly do your funds erode if you don’t use the card for a while? I suspect a very useful revenue stream for prepaid card issuers is the depletion of value over time – and the many cards that travelers have simply forgotten about.
Cash has many advantages
Obtaining the local currency locks you into an exchange rate and can therefore calculate precisely how much a cup of coffee or an overnight stay costs in sterling. Cash also says less about you than plastic, eliminating the risk of credit card fraud.
Many people use their credit or debit card to withdraw money abroad. But in addition to the fees added by your card provider, many overseas ATM operators charge a Direct Access Fee (DAF). Providing a fully stocked ATM on a Greek island, with all the security and maintenance issues that entails, is a costly business, they point out – and transaction fees reflect that reality.
Buying before your trip is therefore a good plan. Foreign currency is the ultimate commodity: the euros or dollars you get cheaply at an underground currency exchange are worth exactly the same as the notes you buy expensively at your main bank. But the only way to reasonably compare rates is to ask the right question.
In your local high street, don’t expect much from the banks – who now seem to consider foreign exchange a faff, and often limit it to existing customers (and give them a lousy rate).
Travel agencies usually offer a better deal. And the post office is worth checking. But you’re almost certain to get a better deal if you shop online through companies like Travelex and Moneycorp, and collect foreign currency at an airport or ferry port.
For the best deals, it helps to be in London. Search Thomas Exchange Global for some of the best rates. You can pay online and withdraw the money at a Thomas Exchange office.
Better yet, stroll along Britain’s finest foreign exchange thoroughfare: Queensway in London W2. A few hundred meters away there are two dozen exchange offices. It takes 10 minutes to compare fares, and with many tourists selling euros or dollars for pounds, there is a desire to make a quick profit.
All of this only applies to the “big” currencies: the euro and the dollar, but also the Swiss franc, the Canadian and Australian dollars. You can also pre-purchase Scandinavian currency or New Zealand dollars (low competition at destination means rates are rarely good).
But just about every other currency counts as “exotic,” and for those the rule is: wait until you get to the country in question.
Currency for Croatia
Unlike Greece, Italy, Spain, Portugal and other Mediterranean countries, Croatia does not use the euro. Its currency remains the kuna. This means that the usual advice for European holidays – buy euros in the UK at the best rate you can find – does not apply to the Adriatic nation.
First rule: do not change kuna in large quantities in Great Britain; you will get a much worse rate than in Croatia. Take clean £20 Bank of England notes (along with a few £5 and £10 notes in case you need to change small amounts towards the end of your stay).
If you like to have a modest amount of foreign currency for incidentals when you arrive, I suggest you go to your local post office and change around £20 into Croatian kuna. You won’t get a great exchange rate, but it will be better than your departure airport. And it’s commission-free, which is handy for small transactions like this.
I prefer to wait until I reach the airport of arrival in Croatia and change a few pounds there – but only a small amount. Once you arrive at your final destination, you will soon be able to identify the Bureau de Change (locally called mjenjacnica) with the best rates for the British pound. Even in small towns, there are opportunities for change; inquire at the tourist office or a travel agency.
When shopping, note that some places charge commission and some don’t, the sensible question to compare rates is, “How many kunas will you give me for £100?”
Higher rates are available for euros – to which the kuna is pegged – than for pounds. So, if you have spare Euros and you don’t plan to travel to a Eurozone country anytime soon, you might as well bring them. But do not change the pound to euros and then to Croatian kuna; you pay two margins in the process.
Due to the extraordinary economic policies carried out by the Turkish President, the lira has plummeted against most other currencies, including the British pound. You are now getting more than twice as many liras for your pound as two years ago, and there is probably still a fall in the Turkish currency.
As above, do not buy Turkish lira in large quantities in the UK; instead take clean Bank of England notes and change reasonably small amounts in case there is another sudden collapse in the lira. Little and often is the best way.