When travelling abroad, it’s important to manage your travel money well. If you fail to get the best deals when exchanging currency or using your money in another country, you could spend more than you need to, increasing the total cost of your trip.
Making your travel money stretch further isn’t hard to do; you just need to know what to avoid and what to look for before you set off to your destination. Use our guide to help you get the best deals on travel money.
What is travel money?
In basic terms, travel money is what you exchange your own currency for to use when in a different country. You can take out travel money as cash to spend abroad or load it into a prepaid travel card before you travel.
When you take out travel money, you will be shown an exchange rate. This rate will tell you how much foreign currency you’ll get for your pounds.
As a basic example, a dollar exchange rate of 1.27 means you’ll get back 1 dollar and 27 cents for every pound you exchange. Multiple providers of travel money will offer you an exchange rate, and their exchange rate may defer between providers. You can then use the exchange rate to compare between providers to find the best value.
Exchange rates can also fluctuate from day to day. When planning a trip abroad, it’s always good to monitor this to help you buy your travel money on a day when the rate is the best value.
It’s also worth noting that there are two exchange rates for travel money: the sell rate and the buy rate.
The sell rate is the exchange rate you will be sold a foreign currency. So, if you’re going to Italy, you’ll exchange your pounds for euros at the sell rate.
If you have any extra foreign currency when returning from a trip, you can exchange that back into pounds. This will be bought from you at the buy rate. This rate is often different from the sell rate.
Where should I get travel money from?
There are multiple places where you can get travel money from. These include:
The post office
Bureaux de change
Some travel agents and large supermarkets
These are all viable options to get your travel money because the majority are likely to offer a competitive exchange rate and may usually not have many fees if any.
As well as these locations, you can also buy your travel money at the airport. You shouldn’t do this. This is because the exchange rate at an airport can be a lot worse. After all, there’s little incentive to offer competitive prices, because, at this point, there are no other options a traveller can use to get travel money.
Plus, in addition to a poor exchange rate, they may also charge you a service fee, often 10% of the total money exchanged. This means if you exchange £1000 for a different currency, you’ll be paying £1100 to do it.
What are travel money charges and fees?
Depending on how and where you get your travel money, you may have to pay additional charges and fees.
When getting travel money from a bank or from the post office, you’ll likely not have to pay any fees or charges – providing you’re paying out of your current account. This is because when getting travel money, it’s considered the same as a withdrawal or purchase.
Buying travel money with a credit card is different, though. Doing this will be considered a cash advance, which means you’ll have to pay a cash advance fee, usually 3% of the withdrawn amount from most card providers. Also, the amount you buy with a credit card will start to earn interest immediately at your credit card provider’s cash advance rate. If you want to save travel money, avoid this payment method.
Some travel money providers may also charge a service fee.
Tips to save money on travel
Once you have your travel money, you can do a few things to ensure you’re saving money and not overspending.
Load it into a prepaid travel card
When you get your travel money, it’s best to load it onto a prepaid travel card. Doing this will lock in the exchange rate you bought the currency for and ensure you avoid costly withdrawal fees and other charges if you were to use a debit or credit card to pay for items when abroad.
Only get the amount of travel money you need
Because of the difference between the buy and sell exchange rate, if you get too much travel money and fail to spend it all, you’ll lose out on some cash when you convert it back into pounds.
For example, if you spend £1000 to get euros at a sell exchange rate of 1.3, you’ll get €1300. If you return with €300 and want to convert it back to pounds, you won’t get the same 1.3 exchange rate (which would have given you £230.77 back).
Instead, you’ll have a worse buy exchange rate, such as 1.4. When converting your foreign money to pounds, you’ll only get £214.29, losing you money.
Think about what you need your travel money for and try not to buy too much travel money.
Choose to pay in local currency when using card
When paying by card, be it debit card or with a prepaid travel card, opt to pay via the local currency if given a choice to do so. If you don’t choose to do this, the retailer will do the currency conversion instead of your card provider. This conversion may likely be at a worse rate, costing you in the process.
Get a specialist overseas credit card when hiring cars
When travelling overseas, you’ll likely be hiring a car to get around. When doing this, you will likely need a credit card, because car hire firms won’t accept debit or prepaid cards.
As you’re leaving a deposit for the car in a foreign currency, doing this on your typical credit card can be expensive because of the fees and interest that are charged. Getting a specialist overseas card can be a lot cheaper.
Not fully understanding travel money can cost you when you’re abroad. Before you travel, be sure to compare exchange rates, consider prepaid travel cards, and get your travel money from the best providers that avoid extra charges and inflated fees.