The recent demise of Crown Currency Exchange, the company that allowed customers to order £300-£10,000 in foreign currencies up to 12 months before travelling, has thrown the spotlight on our holiday money habits. What are the options for changing our hard-earned pounds for exotic, local currencies?

Cash

Post Office or Marks & Spencer? These household names are among the go-to places for buying holiday money. Rates vary daily and you’ll get the best rates if you buy online (keep an eye on delivery charges though). Never, ever, ever leave it until you get to the airport. You may get a good exchange rate if you change your pounds for the local currency once you arrive, but it’s impossible to know in advance.

Watch out for: signs promising zero per cent commission. You will pay for this with a poorer exchange rate. Keep an eye too on the limit imposed by your travel insurance. If it’s £250, but £300 is stolen, you will not get that £50 back.

Travellers’ cheques

Expensive, but very safe. Even if the worst happens and you lose them, as long as you have the cheque number, you can rest easy. They’ll be replaced.

Watch out for: the commission charges. You’ll be charged when you buy them and you may be charged when you change them into the local currency. The thing to do here is to exchange a large amount so you are paying the fee on, say, £100, rather than £40.

Credit card

Secure mostly, as long as you are careful and don’t let it out of your sight at restaurants and garage forecourts. The challenge here is to find a credit card that doesn’t have cash-withdrawal charges or loading fees. There are a few such cards on the market. The Post Office credit card and Santander Zero credit card are topping the best-buy tables.

Watch out for: foreign currency charges of up to 3 per cent every time you use it abroad. Spend £100, the cost to you will be £103. Beware too a card that charges you for taking money out. That could be another 3 per cent. Finally, there will be the high interest charges if you don’t pay off your balance in full at the end of the month.

Debit card

Using your debit card abroad can be pricey. Most cards will charge you to take money out via an ATM. The rate will be about 2.5 per cent .

Watch out for: loading fees. In this case, the word “loaded” does not mean that you’ll have more money. Quite the opposite. It means that when a card makes a conversion to foreign currency a “load” is charged of up to 3 per cent.

Prepaid currency cards

These cards are becoming more and more popular. A perk of having one of these cards is that you can book flights with the likes of Ryanair and dodge the hefty credit and debit-card charges. They’re a secure way of carrying money abroad; cards can be purchased in euros or dollars. Several cards are available to children of 13 and up, making them great gift ideas for parents and grandparents hoping to teach youngsters how to manage their money. There are fees to consider - a loading fee may be levied every time you put money on the card, a transaction fee may be charged when you use the card, there may be an application fee and even an inactivity fee, if the card is not used within a specific time frame.

Watch out for: the small print.

At the till…

Pay in Sterling or in the local currency, Madam? Always, always choose the local currency. This is due to something called “dynamic currency conversion”, which means, for you, a poorer exchange rate.

Cheapflights’ tips:

Mix it up. A little cash for small purchases, credit card for the big items. Do your research and secure the best rates for dollars, euros, baht etc etc.

Shop around for a credit card that doesn’t charge loading fees. If you do wish to go down the prepaid card route, read the small print very, very carefully. Then read it again.

Finally, enjoy your holiday.

Picture credit: Fotero

This entry was posted on Tuesday, October 19th, 2010 at 12:49 pm and is filed under 233600. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.