New research, compiled for the Telegraph, shows that one of the cheapest ways to pay for your holiday spending is simply to use a debit card in an overseas cash machine.
Both Nationwide and Norwich & Peterborough building societies offer a combination of competitive exchange rates and low foreign-loading charges, that match – or beat – the best online currency deals. Meanwhile Halifax offers a credit card that features far more competitive rates than most prepaid cards. And the research shows that even some of our high street banks may not charge as much as you think to use your plastic overseas – provided you use it wisely.
But as sterling falls again – hitting a three-year low against the dollar this week – tourists will find their holiday spending may not stretch to as many cocktails, so it makes sense to get the best deal possible.
Below we look at what cards you should be carrying in your wallet this summer.
The best plastic for cash machines
The research, by Travelsupermarket.com shows N&P customers will pay just £428 to withdraw €500 from an overseas cashpoint; Nationwide customers will pay £437.66 for the same transaction (based on Monday’s exchange rates).
On the same day the best online deal was from FairFX, which charged £437.45 to buy €500, while MoneyCorp offered £437.56; but both require customers to order money in advance, and wait at home for the delivery – which may not be practical.
But customers may not want to switch their bank account to Nationwide or N&P just to get cheaper holiday money. So how does your debit card compare?
As the table, below, shows, Halifax offers the most competitive deal: withdrawing €500 will cost you £441.37 on its Rewards account. NatWest is the most expensive, charging £448.43 to withdraw the same amount of money. This, though, is still just over £10 more than the cheapest online deal from FairFX.
However, the big high street banks start to look less competitive if you are taking out smaller amounts of cash more frequently. This is because most make a charge on each withdrawal. This can be a flat fee (typically £2) or a percentage charge, as well as loading the exchange rate.
As N&P doesn’t impose these usage fees it is still the clear winner. Whether you take out €500 in one go, or in 10 separate transactions it costs the same.
Nationwide has a low foreign usage fee (it is higher outside the eurozone). So withdrawing €100 five times will cost an extra £4.
However, Lloyds TSB will charge £450.90 for taking out €100 five times. Taking out €50 on 10 occasions would cost £460.90, making it almost £30 more expensive than the cheapest deal.
Bob Atkinson of Travelsupermarket.com said: “If you are only taking out small amounts, debit cards become very expensive. You are paying up to 10pc over the odds.” If you prefer to withdraw small amounts, then switch to Nationwide or N&P, or get a prepaid card instead.
The best credit card deals
If you want to make your holiday spending go further, use a credit card in shops and restaurants, preferably one that doesn’t impose a foreign loading fee. Halifax’s Clarity Card is the standout card. Spending €500 on it costs just £428.64. This is comparable to the N&P deal, but the card is likely to have wider appeal. In contrast the Post Office Platinum Card would charge £439, and Barclaycard £450.
Remember, though, to pay off the balance in full when you return, interest charges will far outweigh the benefit of no foreign usage charge.
As with any credit card do not, on any account, use it to withdraw money from a cashpoint. If you do you will be hit with additional charges. Mr Atkinson said: “This Halifax card offers good exchange rates and no foreign load fees. You also get the benefit of protection under the Consumer Credit Act on any purchases.”
The best prepaid cards
Caxton FX and Travelex offer two of the best-value prepaid cards. Neither charges fees to open the account, nor to load money onto the card. Similarly, you won’t pay any usage fee when using these cards to withdraw money from an ATM. The cost of withdrawing €500 on both is £440 – cheaper than most banks, particularly if you are making lots of withdrawals.
However, prepaid cards offer two big advantages. One is security: if the card is lost or stolen you can reclaim the money. Also if it falls into the hands of fraudsters the maximum they can take is the money you’ve stuck on it for your holiday. It isn’t linked to your bank or credit card details.
The other advantage is that you can effectively play the currency market, and move money onto the cards on days when the pound moves in your favour. A spokesman for ICE, which offers its own prepaid card, said: “Last year there was more than an 8pc difference between the best day for buying euros and the worst.” Locking in your holiday money at a favourable rate can make more difference to your spending money than whether your debit card is with Barclays or NatWest.
Mr Atkinson added: “Check the terms and conditions of prepaid cards. You are likely to get a less favourable rate if you are switching surplus euros back to pounds after your holiday.”
How low can you go?
According to HiFX, the currency broker, your holiday money buys a lot less now than it did five or 10 years ago. At its current rate, £500 will get you around €577.50, before any charges. The same amount in sterling would have bought you €630 five years ago and a whopping €725 in 2003.
It's a similar picture with the dollar. Today £500 will buy you $744, five years ago you would have got $990 (although it was slightly less, $830, 10 years ago).
But it's a different story elsewhere. Mark Bodega, director of HiFX, said those travelling to South Africa, for example, will find the pound buys them as many rand as it did prior to the financial crisis. He said: "Outside the eurozone, Turkey and Croatia look very good value, as rates are back up to where they were in 2007."
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