Top tips for exchanging your holiday money

Last Modified 16th of February 2021

When it comes to foreign exchange, it’s best to plan in advance. Many of us are guilty of leaving it till the last minute to change our money, but it really pays to think ahead. Currency exchange in airports, train stations and hotels offer some of the worst exchange rates on the market, so always try to do some research and get your foreign currency before you go.

Research the exchange rate

The best thing to do is look at the currency exchange rates on the Internet to get a rough idea of whether the rate is strong. Contact foreign exchange brokers to ask them if it is a good time to buy and check the exchange rate on the day to give you a rough idea of what you should be expecting for your money.

Check online comparison sites

Usually you’ll find the most competitive exchange rates online, so make sure you have a look on comparison sites to compare the rates offered by different money providers. They will usually deliver the money to your home or allow you to pre-order and collect it from one of their retail branches.

Look at the commission fees as well as the exchange rate

Whether you choose to change your money at you bank, a high-street provider or online, always look at what commission fees they charge. Generally you want to find a provider that offers a good exchange rate and a low commission fee. Be wary of money changers that advertise ‘commission-free’ services, as they may offer a poor exchange rate to make some of their money back.

Find out the ‘buy back’ rate

If you have any foreign currency left over when you return from your vacation, try to return it to the place where you bought it in the first place. Many currency exchange providers will buy back your money commission-free if you have your receipt.

Change larger sums of money

Generally the more money you change, the better the exchange rate will be. Some money changers charge fixed commission fees no matter how much money you change, so it’s in your interest to change a larger amount. Since many shops and restaurants abroad don’t like big 200 Euro notes, try to ask for notes in smaller denominations if they have them.

Avoid ‘dynamic’ currency exchange

When you’re paying for goods in a foreign currency with a card machine, they may ask you if you would like to pay in your own currency. This is called ‘dynamic’ currency exchange, and whilst it might seem convenient to pay in your own currency, they will offer a poor rate, so always opt to pay in the local currency.

Be cautious of using credit and debit cards abroad

When using credit and debit cards abroad, you usually get the best exchange rate because they give you the rate that the banks offer to each other, with no middle man involved. However, the main pitfall is that you get caught with cash machine fees, commission and loading fees on purchases. When drawing money out of the machine, take out bigger amounts at once so you don’t have to go to the cash machine too often. Save your card for larger purchases like hotel bills and car rentals so you’re not constantly paying fees. Try to shop around for a specialist card that doesn’t charge cash machine and transaction fees, but make sure you pay it off in full within 1 month to avoid being lumbered with debt. Also, it’s worth noting banks may try to contact you as they might see the overseas transactions as fraudulent activity. They may block your card and you could spend a few hours (and pounds) on the phone to your bank back in the UK trying to set things right.

Travellers cheques and prepaid Cards

Travellers cheques and prepaid cards offer the safest way to carry your travel money in case it gets lost or stolen because you can get your money back. However, travellers cheques aren’t usually the cheapest way to carry money – providers usually charge a commission fee when you buy them, and then when you cash them in abroad, the exchange rate is applied, along with a flat fee. With a prepaid card you control the amount of money you put on it and you can use it worldwide. The downfall is that prepaid cards is you can get hit with card application fees, withdrawal fees and charges for topping up. You also have to think about how you want to top up, as some cards only let you top up face-to-face, whereas others can be topped up over the phone or online. Again, it’s all about shopping around to find a card that offers lower fees.

Sending money with foreign exchange brokers

If you’re sending money abroad, foreign exchange brokers usually offer better exchange rates than banks. Again, the more money you send, the better the rate will be.