Getting the best deal on foreign currency is not easy, and going to your bank is not usually the best idea. But you will get even less for your money if you change your currency at the airport.
Buying your currency online will often give you the best exchange rate, and you need to give yourself enough time for the currency to reach your home. This usually takes no more than a couple of days, but you will be getting significantly more for your money this way.
Just because you do not pay commission on currency exchange, it does not mean you are getting the best deal. More often than not, these deals give you less for your money in the exchange rate, which wipes out any benefit from not paying commission.
Commission charges usually range from around £1.25 to £3. Minimum charges make changing small amounts of currency very expensive, and if you pay a flat-fee, that can make it more efficient to change a larger amount of currency. This fee will not change no matter how much you want to exchange.
If you will want to change the money back when you get home, than you need to think about the 'buy-back' rate. It can be a better option just to hold the money in the currency - especially if it is euros - ready for you next trip within Europe.
Be wary of taking too much cash abroad with you though, as if you get mugged, for example, that money is gone.
Traveller's cheques - a safer alternative?
Traveller's cheques are becoming an antiquated way of dealing with cash overseas, and can be expensive. You are looking at commission charges of as much as 2-3 per cent when you cash the cheque in.
If you want to use them, they are replaceable if they are lost or stolen, but you must sign each one as soon as you receive them. Some providers may offer free commission, especially for students.
While they are becoming outdated, you can use traveller's cheques as a means of 'mixing and matching' the way you take currency abroad. In remote areas, remember you may have problems cashing them in.
Using a credit card abroad
If you want to use a credit card abroad, you need one that has low, or no, charges to do so. The terms will change over time, so you need to be sure you are not going to be charged for using your card when you buy something overseas. Getting one specifically for this job is not a bad idea.
You should look for a card with 0 per cent on purchases, and low or no loading fees for using the card abroad - these can reach nearly 3 per cent in some cases.
You can have cash withdrawal fees on both debit and credit cards if you are using them abroad, which are often around 2 per cent. Sometimes though there is a set fee, so if that is the case, then use your card to make fewer withdrawals of a higher value.
Mixing cash and credit or debit cards will usually be the best way to get the most out of your money overseas.
Dynamic currency conversion
If you are offered the chance to be billed in sterling, then think carefully, as usually you will have a worse exchange rate if you choose this option. You are often better off being billed in the local currency, so ask for that before you sign or enter your PIN.
These are cards that you can load currency onto before you go abroad, and you use them just like a credit card. The biggest difference is that once you have used up all the money on the card, it will stop working, so you cannot go overdrawn. It helps you stick to a budget, and you can load more money onto the card if you need to via phone or the internet.
If you lose your card, you can get another one by contacting your provider, which makes it a safer way to take money when you travel. You credit history will not play a part in whether you can get the card or not either, which will be a blessing to some.
You should check what charges are applied to the cards, as some providers will give you 0 per cent on foreign exchange fees. On the downside, you can be charged for ATM withdrawals, topping up the card, and for applying for the card in the first place.