With so many different providers offering foreign exchange it can be difficult to know where to start, and if you don't know the basics, you could end up paying over the odds. So take a look at our guide to travel money jargon to make sure you get the best deal.
What is travel money?
Your travel money is the funds you have available when overseas, but this doesn't just mean cash. You can also carry a credit or debit card, a pre paid card or travellers’ cheques.
Travellers’ cheques
Using travellers’ cheques is an alternative to carrying cash. You sign your cheques when you receive them and they can then be used as payment when travelling abroad.
When you use a cheque you'll receive change as you would with cash. But unlike cash, as long as you note down the serial numbers of your cheques, you will be able to get them replaced if they are lost or stolen.
Prepaid cards
Prepaid cards are fast becoming one of the most popular ways to spend money on holiday. You can put money on your prepaid card in the same way as you would with a phone top up card or store gift card.
The main advantage of using a prepaid card is that you know exactly how much money you have on there, so you can control your spending. It is also worth noting that they can be more secure than other options in these circumstances.
Credit cards
A credit card provides you with credit to withdraw cash to make purchases up to a pre determined limit. You pay interest on the money you spend but can pay back the cash in affordable increments.
When you use a credit card to make a transaction you will be charged a fee, check with your provider to find out exactly what costs you could incur. You can also use a debit card when abroad, but many providers will charge you a fee for this too.
Loading fees
You may be charged a 'loading fee' for converting your money when making transactions in a foreign currency, which is generally around 2.5%.
Exchange rate
An exchange rate describes how much of one currency you will get when it's converted for another currency. So if you are travelling to the USA the exchange rate will determine how many US dollars you get for your pound.
Exchange rates can vary on a daily basis and different providers can offer different exchange rates, so look for the best rate when changing your money. When you exchange money you'll also be charged a commission fee by your provider for the cost of converting your cash.
Cash withdrawal charges
When you are abroad it's possible to withdraw cash from an ATM using a credit or debit card. The majority of banks and building societies will charge a transaction fee for any withdrawals which will be a percentage of the amount you take out. When you make a withdrawal this charge will generally be increased and can be quite expensive, so make sure you know how much you will be charged before you make a withdrawal.
Dynamic currency conversion
Dynamic currency conversion is a unique process that allows certain retailers to convert your bill into your home currency (such as sterling) if you are using a credit/debit card overseas. In many cases, due to the specialist nature of the service, the retailer may apply a higher exchange rate for carrying this out.
However, you may consider such a sacrifice to be worth it if you can see the exact price of what you are paying for in a currency you are comfortable with and are used to dealing with. It may be worth checking each slip or bill before entering your PIN as the retailer may not necessarily always ask you.
Commission charges
Commission charges represent the fee that that the currency converter will typically charge for its services. In many cases, they will also be applied to travellers’ cheques.
Handling fees
A handling fee simply represents the amount of money which is charged by the seller in order to carry out the exchange into foreign currency.
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