Making the right decision about how and where to buy your holiday money can make a big difference to the cost of your trip and even make your spending money go further.
Credit cards
These are ideal in an emergency. As long as you can remember your PIN number, using your plastic to obtain currency from foreign ATMs is quick and simple. If your card is lost or stolen you can cancel it immediately via your provider, but make sure you take the cancellation telephone number with you on holiday. However, if you do need a replacement card it probably won't reach you while you're on holiday, so it's best not to use a credit card exclusively.
Using your credit card to withdraw lots of small amounts of money from foreign ATMs can be very expensive. Depending on the type of card and the provider, you may end up paying three separate charges for the convenience.
Many providers charge interest on any sum in cash from the day you with withdraw it, even if you card offers you an interest-free deal for purchases. One way round this is to make sure your card has a credit balance before you go - by paying in cash or overpaying in the months before your holiday.
The second charge to watch out for is what's known as a "foreign currency loading". Credit and debit card providers benefit from buying foreign currency on the wholesale market, where exchange rates are much more competitive. However, they don't pass this saving on to you; rather, they charge you for the privilege of withdrawing foreign cash or making foreign purchases.
Finally, if you withdraw cash either in the UK or abroad you will pay a handling fee - this can be up to 2%. Nationwide is one of the few providers which doesn't have a fee for purchases made abroad and charges 1.25% on cash withdrawals. You can find out more about its card at Nationwide.co.uk. Liverpool Victoria's credit card is another good bet: it doesn't charge foreign currency loading or commission charges on purchases within the EU. More details on 0800 134 134 or at Livepoolvictoria.co.uk.
If you use your Switch or debit card to take out cash you will generally have to pay a foreign currency "loading" and the cash handling fee for withdrawing money. If you are making a purchase, you may have to pay up to 2.75% on the total cost of the goods.
Cash
Carrying notes - either in sterling or the local currency - is a cheap and simple way of taking money abroad. You can often get very good rates for changing notes at banks and bureaux de change. However, it has one major disadvantage - if you lose it or it's stolen, you have absolutely no comeback. Taking small amounts of cash so that you have change at the airport, for a taxi, or when you arrive at your hotel is a better idea than taking the whole of your spending money in cash.
Travellers' cheques
These are the most secure way of carrying money. Each cheque is unique to you and if you lose them you won't usually be out of pocket. However, you do need to keep a list of the serial numbers somewhere separate from the cheques themselves, in case they are stolen. You pay a little more for this security - either a small fee to buy sterling cheques, and then whatever the local exchange rate is when you change, or commission and the bank's exchange rate if you buy foreign travellers' cheques in the UK. There are some competitive deals around, which are constantly changing, so check rates before you buy.
Changing money abroad
If you change your money at a bureau de change, the difference between the buying and selling rates at kiosks is around 5%, so once again it pays to shop around. Hotels don't tend to give the best rates for cash or travellers cheques either, but they can be a good source of emergency money if the banks are closed, and in some countries are a more secure place to change money than on the high street.
It's rarely a good idea to leave buying all your holiday money until you get to the airport, since the exchange rates won't be as competitive.
The Post Office now offers a commission-free foreign currency service, and you can find out more information at your local branch or online at Postoffice.co.uk, or on 08458 500 900.
You could also compare deals at one of the online currency shops, such as Onlinefx.co.uk, which shows daily exchange rates and has an online currency calculator.
