A family holiday abroad now costs an average of £2,725, according to a recent survey from Switch/Maestro. So any saving made that doesn't spoil your well-earned break will be welcomed by most holidaymakers. One way to cut costs is to shop around when buying your holiday money - this will involve a careful balance of exchange rates against commission and charges.
High-street rates
If you prefer to have your currency in your hand before you pack your bags, you may be considering buying it on the high street. Collecting currency from a branch of your bank will often mean compromising on your exchange rate but, as an account holder, you should escape paying commission. A "conversion" or "handling" charge might apply though - Halifax, for example, charges even its own customers 2.75%.
If you use your credit card to pay for your money the issuer will levy a typical 2% "cash advance fee" wherever you buy. This fee can also apply to some debit cards so paying with cash is the only guaranteed way to escape a charge.
It's difficult to say that one provider is better than another, as exchange rates play a key part in value and they vary every day. However, the Post Office often presents the best all-round value on the high street. It does not charge commission or any hidden extras and when it comes to the number of euros you pocket for each pound, it aims to be in the top three providers on the high street.
"In addition, you will find the same exchange rate in every branch from Land's End to John O'Groats," says Hugh Stacey, head of travel services at the Post Office. "Other providers such as Thomas Cook offer different rates across their branches. You can negotiate them down but who wants to start haggling before they even get to Egypt?"
Marks & Spencer Money also offers fee-free currency at its bureau de change points, although these can be found in just 50 UK stores. But any real benefits are kept back for its &More store or credit card holders who can order currency online or via the telephone. M&S Money will then provide a next-day delivery service to your home - office deliveries are not an option. Sums of £500 or more won't incur a delivery charge but on anything less you will pay a flat rate of £5. But the real bonus for M&S account holders is that there is no cash advance fee to pay.
Online exchanges
As for exchange rates, the best are often found away from the high street. Online currency provider, Travelex, for example, will provide the cheapest rate on the entire market - or refund consumers the difference. "We even have a rate tracker service whereby you can set the exchange rate you want to achieve," says a Travelex spokesman, Chris Hides. "When it is hit we will send you an email informing you that now is the time to buy."
Travelex does not charge commission or service fees. This, argues Donald Mackenzie, managing director at wholesale currency provider, FX Corporation, is because it doesn't provide a service. "You have to queue up with everyone else and pick your currency up from the airport," he says. And if you are not flying, not every port or railway station will have a Travelex bureau.
Pre-ordering currency in this way is likely to be cheaper than waiting until you arrive at the airport to buy it. The exchange rate you get applies to the day you ordered the currency - not when you collect or take delivery of it -so ordering in advance should, in theory, give you more chance to grab the best rate. And even if the rate swings in your favour on departure day, there seems to be a rule in currency: the closer you get to a port or airport, the more expensive your money will be.
This is supported by recent research from Co-op Travel and Travelcare, which found that buying currency from an airport bureau can cost a holidaymaker up to £9 extra for every £100 of currency. The worst deals were found at Doncaster's Robin Hood Airport, where holiday makers were being offered a very poor exchange rate, and charged £5 commission on any exchange under £400.
Cheque mates
These days, of course, you can withdraw cash from an ATM when you arrive at your destination but this isn't always a cheap option either. If you have a current account with Barclays, for example, you will be charged a 1.5% withdrawal fee plus a 2.75% conversion fee each time you visit the ATM.
And if you use a credit card at the hole in the wall you could almost pay for another holiday with the charges. With a Mastercard or Visa from Abbey, for instance, you will be charged a cash advance fee of up to 3% as well as interest in the region of 20%. So if you are forced into this situation, minimising the number of trips to the ATM is wise.
Carrying too much cash however is not sensible, so taking some travellers cheques is a good idea. Even commission-free bureaus such as the Post Office and M&S charge between 1 and 1.5% on cheques in sterling although you won't pay to collect them in the foreign currency. "Travellers Cheques are now often described as old fashioned but actually they are a very robust mechanism of taking money abroad," says Mr Stacey at the Post Office. "Not only are you protected if you lose them, if you are a family with a budget, you know exactly what you've got."
Tomorrow: house swaps
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