Make sure you shop around to get the best deal when exchanging your pounds for foreign currency, writes Iain Yule
Whether heading abroad on holiday, or moving more permanently, you will need to change your pounds sterling into the local currency.
But there are many different ways of exchanging money, all of which may have their own merits and drawbacks. There are many hidden and some obvious ways to lose money unnecessarily when buying foreign currency.
Rates of exchange and handlers’ fees vary enormously, and it pays to do your homework before heading abroad.
If you’re looking for a place to change your travel money, you will find you have a number of different options to choose from. So which one should you go for?
Studies have shown that the airport is the worst place to get your foreign currency, because you’ll be at the mercy of currency sellers who know you have no other options and therefore offer poor exchange rates.
You should also avoid being swayed by currency sellers who advertise commission-free deals as they may be offering pricier rates to begin with.
You may feel inclined to exchange your currency with your bank, perhaps because you feel you can trust it, or perhaps because you think you’ll get a good exchange rate as an existing customer – but the truth is that you probably won’t get any preferential treatment.
Some banks and building societies will occasionally offer promotional rates or commission-free exchange, but that doesn’t mean that they’ll be cheaper than the alternatives, such as bureaux de change, travel agents and the Post Office.
As with anything financial, the key to getting the best exchange rate is to shop around. But you’ll often find that online foreign exchange companies have better rates than the high street banks and this also means you can compare deals easily without having to trudge around town.
However, if you are thinking of ordering your travel money online, find out whether the provider will deliver your currency and whether this will cost you. Some providers will deliver your foreign currency to your home for free or, if it has high street branches, you can pick it up in store or even at the branch at the airport you’re travelling from.
Bear in mind though that some companies have a minimum order threshold before you can exchange your cash.
Ultimately, when deciding where to get your money from, you should work out how much currency you’ll get in exchange for your pounds, once the fees and charges have been accounted for. Whichever currency seller offers the most is the one you want.
Getting The Best Deal
No matter if you’re planning to take cash, travellers’ cheques, a credit card or prepaid card to pay for things abroad, there are a few basic principles to follow to get the best deal for your money.
It’s always useful to take a small amount of cash with you when you go – after all, you might need to pay for a taxi as soon as you arrive or to buy some refreshments.
Of course, while cash is the easiest to use, it’s also the easiest to be stolen, so make sure you have adequate travel insurance in place to ensure your money will be protected should you lose it.
The amount of foreign currency you get in return for your pounds and pence will depend on the exchange rate being offered by the convertor. The higher the exchange rate is, the more foreign currency you’ll get for your money (broadly speaking).
Often, foreign exchange companies will take a commission for converting your cash, which you need to factor in when working out if something’s a good deal. If, for example, you see a really competitive exchange rate, it might not be such good value if it comes with high commission charges.
Ideally, you want to find a company with low or no commission fees, but one that also offers a competitive rate. Be aware that some ‘commission-free’ deals mean that the rate of exchange you get is poor, so you need to take this into account.
You should also look out for ‘handling fees’ (normally around £3, but can be higher) and minimum charges, particularly if you’re converting a relatively small sum.
Exchange rates change constantly, so it’s best to monitor them and strike while the iron is hot when you see a competitive rate, otherwise you’ll miss out.
Iain Yule is the Editorial Director of www.worldofexpats.com