Most of us leave sorting out our holiday spends to the last minute every year, limiting our options and inevitably pushing up the cost.
Leave it too late, and you won’t have enough time to apply for a cheap overseas card or give yourself the time to ensure you are getting the best rate.
So This is Money has put together a time line of when you need to start looking for a cheap travel credit or debit card and how to catch the exchange rate at its best when changing currency.
Prefer cash? Sign up to a free currency alert to get the best rate when you exchange
Three months to go…
With the pound still weak, it’s more important than ever to get the best rate you can.
While it may seem a bit premature, it could be worth keeping an eye on the exchange rate in the few months before your trip.
According to FairFX in the three months to the start of the holiday season (mid-july) last year, the pound to euro exchange rate fluctuated by 7 per cent. For a family taking out £1,000 that’s worth an extra £68.
The pound against the Australian Dollar fluctuated by the same 7 per cent pushing up bills by £62 for those who bought at the wrong time and families heading to the US saw a 4 per cent increase, worth about £36 for every £1,000 exchanged.
If you start preparing now, you have a couple of months until the start of the school holidays when holiday season kicks into gear, and it gives you plenty of time if you are travelling during the peak summer season in August.
Of course, it’s difficult to predict what rates will do this year, but there are some helpful and hassle-free tools which can help.
A handful of currency exchange specialists offer online tracking services which will alert you when it reaches a certain level, changes by a certain amount or say reaches a two-week high.
Three golden rules for holiday cash
- Firstly never buy at the airport. The rate is usually far more expensive (unless you have reserved the online rate beforehand to collect).
- Buying online, from one of the currency exchange specialists will typically get you the best deal. Make sure you always run a search online first to compare. There are a few tools about that let you do this try MyTravelMoney.co.uk. Most specialist currency exchange companies will let you order it by post or let you pick it up in person.
- Finally, remember to avoid using a credit card to pay for your currency as it will be classed as a cash withdrawal which typically comes with fees and hefty interest as soon as you make the transaction.
Down under: You can choose single or multi currency prepaid cards
Prepaid currency card
The same sort of lead time is likely sensible if you want to take out a prepaid currency card.
Currency cards can be ordered online and loaded with either a single or multiple currencies at any time (meaning you can add cash when the rate is at its best). They look and feel like a debit card, you can spend as normal or withdraw cash until the money runs out.
These specialist cards tend to arrive fairly swiftly (most within 3-5 days) so they can be a good last minute option too, but as with travel cash, you may want to get one early to give you the best chance of locking in to a good rate.
Topping them up can usually be done online, by phone or even via the Post Office in some instances.
The top offers come with free withdrawals and purchases, and much better rates than you would get with a credit or debit card.
When you choose your own make sure you factor in the exchange rate, upfront costs and fees for loading and minimum top up amounts.
The major benefit of these cards, apart from the flexibility to load when you want, is that they are not linked to your bank, therefore if the worst happens thieves don’t have access to any cash beyond what’s on there.
Watch out for these traps though
If you don’t use your card some apply dormancy or inactivity fees after a year, which typically cost around £2-£3 per month.
Avoid using them at home as they usually apply extra fees for UK use.
Its best to sidestep these cards for any transactions which require pre-authorisation, for example for car hire, hotel booking or at self-service petrol stations.
In these cases companies can estimate your final bill and ring-fence the amount on your card before the actual amount is taken, meaning you won’t be able to access those funds during your holiday.
Sun, sea and sand: don’t let hefty overseas sending charges ruin you holiday
One month to go…
You have probably heard it before, but using your regular bank or credit card when you are abroad can prove an expensive mistake.
Most come with a 2-3 per cent charge for foreign transactions, with an extra 3 per cent if you withdraw cash from an ATM while overseas.
Most credit cards and bank accounts claim they take a couple of weeks from applying to receiving in the post, but you may want to give yourself a little more time just in case it doesn’t turn up in the post or if they need to do extra security checks.
You can read out guide to the best credit and debit cards to use abroad here, but below we have put together a brief list of the top deals.
Using a credit card abroad has one major bonus, it comes with extra protection, thanks to Section 75 of the Consumer Credit Act.
This means if you pay for something costing between £100 and £30,000 on a credit card you have extra rights to a refund if something goes wrong. You can read more about this here, but it might be useful for large purchases or booking hotel or travel.
Remember though, most lenders apply interest on foreign transactions immediately without the typical grace period offered until your statement date, and sometimes at a higher rate, so make sure to clear the debt as soon as possible.
We have listed our top picks according to how quickly they arrive, but make sure you pick the right card for you according to fees and features, and always check the small print before applying.
New challenger, Tandem, recently launched a credit card that pays 0.5 per cent cashback on all spending, including on holiday. It charges no overseas withdrawal or purchase fees with interest of 18.9 per cent APR.
It claims your pin and card should be with you within 3-5 days, making a one of the best last minute deals to get, but you will only want to apply if you are happy to manage an account via mobile banking.
Barclaycard’s Platinum Travel credit card comes with 0 per cent interest on purchases for 12 months and no fees for using it abroad until August 31 2022.
ALWAYS PAY IN THE LOCAL CURRENCY
The number one rule to remember is never choose to pay in pounds if you are given the option, always choose the local currency.
Otherwise you will be charged their own rate which is typically much higher.
If you are using a cash machine abroad remember some may charge you their own additional fees on top of your bank’s own charges.
The 0 per cent interest deal also applies to overseas purchases, which means you won’t be charged interest on foreign transactions straight away as with most travel credit cards. It says cards should be with you within five working days.
The Post office has a similar deal on its Platinum Credit Card, it comes with 0 per cent interest on purchases for 28 months.
It charges no fees for overseas purchases and you can buy currency on your card with no extra fees at the Post Office. Avoid overseas cash withdrawals as they cost 2.5 per cent and incur interest instantly at 27.9 per cent.
The Post Office estimates card will be with customers within 7 working days if they are successful.
For a low interest rate attached to free overseas spending and withdrawals, Creation’s Everyday Credit Card comes out on top with an APR of 12.9 per cent but only those with the best credit ratings will be offered this, and potential rates on the card go up to 21.9 per cent. Creation estimates it will take 7-10 days to arrive.
Santander’s Zero Credit Card again has no overseas fees for spending or withdrawing cash from an ATM. Interest on the card is 18.9 APR per cent, but you get until the date on your statement to pay off purchases.
Watch out, withdrawals begin to clock up interest as soon as they are made, and at a higher rate of 29.9 per cent. Again you should get your card within 7-10 working days.
Halifax Clarity credit card has long been a popular option for no-frills overseas spending or withdrawing cash at home or abroad. Plus anyone signing up through comparison site MoneySupermarket before August 31 can earn £20 cashback for making a purchase overseas. Standard interest is set at 18.9 per cent. The bank says it should arrive within 14 days.
Mykonos: With a weaker pound, make sure your money goes further and don’t leave sorting your holiday cash to the last moment
Best bet last minute…
Some of the cheapest debit cards to use abroad can be applied for and delivered slightly quicker as they are offered by challengers that claim instant account opening.
Our top pick for debit cards its Starling which claims most people can get an instant decision when applying for an account. It’s is a new app-only challenger bank which charges nothing extra to use your debit card for both transactions and withdrawals anywhere in the world – the only deal out there to offer both, with no limits.
Cards are expected to be delivered in 2-3 working days, but you can load it to Apple Pay instantly.
Mobile-only banking might not be for your but the app lets you categorise your spending, freeze your card temporarily if you lose it and set up savings goals.
Rival Monzo previously offered the same deal, but it recently added a cap on free overseas withdrawals of £200 per month, with a 3 per cent charge after that. It claims on its website it takes just a few minutes to apply.
Monzo still currently has a waiting list for accounts, it says this is usually around 2 days, but some people may not wait at all, and it could be phased out in the future. Once you have been accepted you could the card is sent first class and if your order one before 3pm you can get it the next day.
If you have a Metro Bank debit card you won’t pay anything to use your account while in Europe. It now lets you apply online, but you can actually open and account and print your debit card instantly in branch (most of these sadly are within the M25 though so not accessible to all).
Virgin Money’s basic banking option – the Essentials Account – charges £1.50 for withdrawals but applies no foreign transaction fees to purchases. It typically takes 5 days to arrive according to the bank.
THIS IS MONEY’S FIVE OF THE BEST HOLIDAY MONEY DEALS