When it comes to travel money, to get the most bang for your buck you need to find the best exchange rate.
To learn more about this and other ways to make the most of your holiday cash, read our travel money guide.
Withdrawing cash abroad
It can be advantageous to withdraw cash abroad if there is a lower exchange rate than in your home country. But it is often difficult to know exactly what the current exchange rate is at the time you're using an ATM, and you'll have to wait for the charge to be credited before you'll know exactly how much you've paid.
In addition, some banks will charge a fee for transactions you make whilst abroad. But many now waive that fee if you use an ATM that belongs to your bank, so find out what fees you are likely to incur before you travel. If you use a credit card to withdraw cash, rather than a debit card, you can incur considerable fees for doing so.
Withdrawing cash abroad using a credit card
With any credit card transaction you carry out, you'll be charged a fee by your bank or building society, but if you are abroad these fees can dramatically increase. However, you won't be charged as highly if you use your credit card to buy services or goods when abroad.
If you want to make sure you can keep track of your money when using a credit card overseas, find out exactly what the charges are from your provider before you travel. This means that you won’t end up spending more than you bargained for.
Exchanging with banks or Bureaux de Change
If you want to convert your cash before you travel, exchanging at banks or the Bureaux de Change can be your best bet. You can compare rates of exchange online and find the provider that's offering the best deal but don't forget that anybody that exchanges money will charge a transaction fee. So it’s best to find out what this is and factor it in to the costs you incur.
How much cash should I exchange?
It's much better to convert all the cash you need at one time rather than making several exchanges, as you'll be charged commission and administration fees on any transaction you make. You may even find providers who offer discounts for larger transactions.
You can also look for providers that offer buy back schemes, where you can sell any leftover currency back to them for a good rate, meaning you won't lose out if you have cash left over.
One of the main advantages of using cash when travelling abroad is that it will be accepted anywhere. Many countries do not accept credit and debit cards that are widely used in the UK, so it's always wise to have cash available just in case. In some countries, such as India, many retailers will accept US dollars or sterling as payment, but you'll often get a better deal if you use the local currency.
Should I use travellers’ cheques or prepaid cards?
Travellers’ cheques and prepaid cards can be useful to have on holiday because you can easily replace them if they are lost or stolen. With a prepaid card you can add as much money as you like and top up your cash in the same way as you would with a mobile phone or gift card. You can even withdraw money from an ATM using a prepaid card, although you will be charged a fee.
The advantage of travellers’ cheques or prepaid cards is that they can offer greater security because you can get them replaced if lost or stolen, so you won't lose your money. However, if you’re travelling to more remote areas, you may find it difficult to use them to make transactions.
Protect your money with travel insurance
In most cases it's advisable to have a mix of different ways to pay when you're on holiday, so include some cash and take a credit, debit or prepaid card too.
You're under no obligation to buy travel insurance when going overseas but it can be very useful if your money is lost or stolen. If you want to protect your cash when abroad then make sure the travel insurance you choose includes claims for lost or stolen money so you don't lose out.
In addition to your insurance, find out what to do if you need cash quickly and make sure you have extra funds available in your account in case of emergency.
Putting a little work into finding the best deals on travel money can help you make significant savings, and insuring your holiday cash will give you peace of mind while you're travelling.
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