We all look forward to our summer holidays. We work hard through the year to have the best break we can, and we’ll also probably do a good amount of research when booking hotels, flights and car hire so that we can get even more for our money.
But do you realise how much you’re losing out by not putting a little more effort into buying your currency? We’re losing £5bn a year as a nation by making simple travel money mistakes.
By making a few smart decisions when buying and spending your foreign currency you can take charge of your travel money and go even further.
1. Always pay in the local currency
If you’re given the option to pay in pounds whilst abroad, always say no – this is a trap called Dynamic Currency Conversion which often offers poorer rates and additional fees applied by the merchant.
These DCC fees add 6% to the overall cost of your transaction on average, but it can sometimes be as much as 10%. Over a full trip abroad it could end up costing you between £60 and £100, depending on how many times you make the mistake.
We’ve discovered that £380m is being lost by UK travellers opting to paying in pounds when abroad, instead of the local currency. Our latest in-depth research for the BBC has actually revealed that the figure is closer to £500m.
2. Don’t leave currency until the last minute
Want to know one of the worst places for buying your currency? The airport.
Each year, a potential £94.3m is wasted by UK travellers exchanging money at the airport.
Our recent research of 15 UK airports found the average difference between the market rate and the rate you’re offered at the airport for euros is 13%, with the worst offender at Southampton Airport using a margin of 26%.
What does that mean for your travel money? We take an average of £1,100 of travel money on holiday, this means buying currency at the airport would lose you £102 worth of euros. If you bought it from the worst offender you’d lose £208 worth of euros.
Buy your currency in advance of your trip and you can effectively choose the exchange rate, rather than having to buy at the poor rate on offer at the airport.
3. Buy when the pound is having a good day
We all know that the price of flights and hotels can fluctuate from one day to the next, but exchange rates can fluctuate just as much.
Sign up to our Rate Alert service and we’ll let you know when the pound is having a good day. Buying when the rate is in your favour means that you’ll get far more travel money for your trip. We found that buying when the rates were at their strongest this year would save you £63 on an average holiday, adding up to £1.7bn for the nation as a whole.
Buy smaller amounts throughout the year when the rate is in your favour and you’ll have squirrelled away the spending money you need for your trip.
4. Don’t default to your debit or credit cards
Think twice before you default to using your UK debit or credit card. Your UK bank card can come with costly fees when you’re spending in a foreign currency, and you’re almost certain to get what we’d consider to be a very poor rate.
Before you use any service, make sure you check all the fees and charges involved. What is their foreign exchange fee? Do they charge a transaction fee or a “processing” fee?We looked at the ATM fees for 6 banks and found that the average ATM fee for debit cards is 2.9% and the average for credit cards is as high as 4.9%. When you use your debit card to spend in shops you’re charged an average fee of 2.8%, and 3.5% for credit cards.
Currently UK travellers as whole end up paying £834m extra for their trip by using the wrong plastic.
Choose a FairFX Prepaid Mastercard® and you’ll benefit from low, transparent fees on your next trip. There’s also no transaction fee for spending in shops, restaurants and bars.
5. Make use of your leftover currency
UK households could have as much as £2.1bn in leftover currency at home.
Leftover currency means you haven’t burnt through the whole budget for your trip but if it’s tucked away at the back of a drawer and forgotten about, you’re losing out. UK travellers bring home an average of £78 in leftover travel cash.
Make sure you put your leftover currency to good use, or better still, load your travel money on a prepaid currency card before you go so that you can load money when you need it and keep the money secure for your next trip.
Take a FairFX Currency Card on your next trip and you can lock in great rates before you travel, spend fee-free in shops and restaurants, manage your spending through our app and share your budget with additional linked cards.