UK residents spend billions of pounds abroad every year, but it can be difficult to know how to make the pound go as far as possible.
With summer approaching, there are also opportunities to go on holiday, so the Money team spoke to travel experts to find out when, where and how to pay abroad.
CREDIT CARD
“The the cheapest way to spend abroad is often on plasticif you have the right plastic,” said James Jones, head of consumer affairs at Experian.
“Using credit and debit cards can be a great way to get the best exchange rates.”
He said the rates offered by exchange shops are usually “much less attractive” than the rates offered on some cards, which are much closer to the rates used by the banks themselves.
The fees could wipe out any gains
However, it is essential to be aware of things like transaction fees, cash withdrawal fees and credit card interest.
So look into a travel rewards card, Mr Jones said – and do it before you travel.
“You’ll probably have to give yourself six weeks ideally.
Extra protection
When you book between £100 and £30,000, try paying part of it by credit card to get “special protection” under section 75 of the Consumer Credit Act, Mr Jones said.
This means that the card provider is jointly responsible with the merchant if something goes wrong, for example when you arrive at the hotel and find it closed.
If you use a credit card, make sure you can pay it off in full to avoid interest charges, said Sean Tipton of the Association of British Travel Agents (ABTA).
One trap you must not fall into
An increasingly common pitfall when paying by card (credit or debit) is the option to pay in local currency or pounds, Jones and Tipton said.
While paying in pounds may “seem like a great convenience”, you end up paying “a bit more for your purchase”, Mr Jones said.
If you pay in pounds, the exchange rate is set by the local merchant’s bank, but if you pay in local currency, your UK bank sets the rate.
DEBIT CARDS
“Some service providers do not charge for overseas use on their regular UK debit cards,” says Moneyfacts – but you should always check as some have high fees.
Alternatively, “some service providers offer special travel debit cards that do not charge non-pound transaction fees and cash withdrawal fees”.
PREPAID TRAVEL CARDS
If you want to avoid credit checks, prepaid cards can be loaded with multiple currencies and work like a debit card without being connected to your bank.
“Prepaid travel cards will usually offer competitive or even no fees for foreign use, which can make them a cheaper alternative to using a regular credit or debit card on holiday,” says MoneyFacts.
One of the most popular prepaid cards, Revolut, uses its own exchange rates, which may not always be the best you can find – and while it’s free on weekdays, there are fees on weekends, so do your research.
Also note that prepaid cards do not offer the same purchase protection as a credit card and are not regulated by the Financial Conduct Authority.
CASH
“Don’t just rely on the card – if you do, it can backfire,” Mr Tipton said.
Some taxis only take cash, so you’ll face high fees for ATM withdrawals.
In some countries, such as Argentina, it can be difficult to get money from ATMs without a local bank account, Mr. Tipton said.
Mr Jones added: “If you’re in a very remote part of the world that doesn’t really have a lot of ATMs and maybe cash rules, then that can dictate what you need to do.”
Where and when to get cash
“I warmly recommend [to] get some money in the UK,” Mr Tipton said.
In some developing countries, it can be difficult to find an exchange office, and ATMs “have started to impose fairly high fees across the board,” he said.
The exception is countries with really high inflation rates, where it may make more sense to get cash when you arrive, he added.
When to exchange currency really depends on the destination, said Laura Plunkett, head of travel money at the Post Office.
“Exchange rates change frequently, so if you have time, do your homework and lock in the rate when it’s good.”
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What is a good exchange rate for Europe?
Around 80% of British holidays abroad take place in the eurozone, Mr Tipton said.
The rate has remained “fairly stable”, but if you see the pound rising in value, it may be time to buy more euros for a few years ahead, he added.
Mr Tipton said 1.2 a pound was a “pretty healthy” time to buy but “it’s a bit of a lottery”.
Every year the pound strengthens against the South African rand and the same applies in Argentina, where the peso is “incredibly weak”, Mr Tipton suggested.
In store or online?
“Most online suppliers will insist on a minimum order value, which may be too high for some people, and you’ll need to make sure you’re home when it’s delivered,” Ms Plunkett said.
“But usually the rates are better online if that’s an option for you.”