Holidaymakers venturing to Europe in the next few months might do well to buy their currency now, while the exchange rate against the pound is so favourable.
Last week, the number of euros you could buy for £1 rose again to reach just shy of the seven-year high it hit in early March. One hundred pounds will now buy you ¤139 compared to the same time last year when you would have got ¤121 for your money. “The continent now offers really good value for money for British holidaymakers,” says Bob Atkinson from TravelSupermarket.
There is no guarantee that today’s rates will last – not least because the uncertainty of the general election in May could send the pound plummeting. If you do want to lock in to today’s rates, one of the best ways to do this is by using a prepaid card.
These cards are essentially the new travellers cheques, but are far easier to use. They can be safer than carrying cash, and are also widely accepted. With this type of plastic you are issued a card, backed by Visa or MasterCard, along with a pin.
Once you have loaded up the card with money, you can use it just as you would a debit card in shops, bars and restaurants. You can also use it to withdraw cash. Andrew Hagger, finance expert from MoneyComms, says: “You could use a prepaid card to lock into the rate today – even if you are not planning to travel abroad for a few months.” The key difference between a prepaid card and a debit card is the fact the former is not linked to your bank account.
“You can’t spend what isn’t on the card, so there is no chance of going into debt,” Atkinson says . “This can be especially useful for younger travellers.” If you want to top up the card while you are away you can do so online or by text. Cards are issued in euros, US dollars and sterling, although you may also be able to get them in other currencies.
There are hundreds on the market, but Atkinson’s top picks include cards from FairFX and Caxton FX. “These offer good all-round deals with low – or no – charges, along with some of the best exchange rates,” he says. “With Caxton, for example, there is no card application fee and no fee for cash machine withdrawals or purchases. It is also free to load and top up.
“With FairFX you have to pay £9.95 to get the card, and there are small ATM fees [around £1]. However, these are offset by the slightly better exchange rate. There is also no fee for spending on the card or topping it up.”
Other top prepaid card picks include Centtrip and myTravelCash (see box). But while there are plenty of great cards on offer, not all offer such a good deal. “Consumers need to bear in mind that many of the cards levy fees,” warns Charlotte Nelson from data firm Moneyfacts. “Certain cards charge you every time you load the card, as well as every time you spend on it or use it to withdraw cash.”
In the case of a global card – one that is loaded with sterling and can be used in multiple countries that accept different currencies – this could mean you end up paying transaction fees plus currency loading. The Post Office Travel Money Card Plus (sterling card), for example, charges 1.5% to load the card and then £1.50 per purchase or ATM withdrawal. “This works out much more expensive than the majority of prepaid cards,” Hagger says.
In addition, the worst cards will also charge you an “inactivity fee” if you leave money on the card at the end of your break – and even a fee to close down the card to get your leftover cash back.
So with all these potential fees, would you be better off just using your bank card?
That, of course, depends on where you bank. If you bank with TSB, for example, every time you buy something you will be charged a fee equivalent to 2.99% of the purchase price of whatever you are buying plus an additional £1 fee. When making a cash withdrawal there is a 2.99% loading cost and a 1.5% fee (of a minimum £2 and maximum £4.50).
There are, however, a host of credit and debit cards designed specifically for use abroad. One of the top credit card recommendations is the Halifax Clarity card, which levies no charge for purchases or ATM withdrawals.
“This card has been a firm favourite since launch,” Hagger says. “The card from Metro Bank is also worth a look as it is fee-free for spending and withdrawals in Europe.”
Most people will not want to change their current account provider to get the best deal on spending abroad, but if you do travel a lot it is worth considering. When it comes to recommended debit cards for use abroad, Hagger’s top picks include Metro Bank (although, like its credit card, it is only fee-free in Europe), as well as Norwich & Peterborough Building Society.
Finally, you should always try to take some cash with you on holiday, as this can prove vital at the start of your trip, and for taxis and tips. But make sure you shop around for the best rates on your money; the most competitive deals are usually found online.
If you have left it too late to organise your cash, pre-order it for collection at the airport via a firm such as Travelex, as this will save you a significant amount compared to walk-up rates at the terminal.
How do costs compare?
On a two-week holiday a family makes purchases totalling £1,500 and five cash withdrawals of £150. The total holiday spend of £2,250 could increase by up to £100 depending on the card used.
Metro Bank (debit) A Europe-only card with no costs or fees for purchases or withdrawals. Total extra spend: £0.
Centtrip (prepaid card) There is a £10 annual fee, a loading cost of 0.5% for purchases, and no fee. But there is a loading cost of 0.5% for cash withdrawals and a flat £1.60 fee. Total extra spend: £29.25.
FairFX Anywhere card (prepaid card) There is a loading cost of 1.4% for purchases, but no fee, and a loading cost of 1.4% for withdrawals, plus a flat fee of £1. Total extra spend £36.50.
myTravelCash (prepaid card) There is a loading cost of 2.99% for purchases but no fee. There is also a loading fee of 2.99% for cash but no withdrawal fee. Total extra spend: £52.28 (includes 1% cashback on purchases).
Halifax (debit card) There is a loading cost of 2.75% on purchases and a £1.50 fee, and a 2.75% loading cost for cash withdrawals and a fee of £1.50. Total extra spend: £99.37
Figures from Moneycomms
