How to Find the Best Foreign Exchange Rate

How to Find the Best Foreign Exchange Rate

In the past tourists used to take a combination of travellers cheques and cash to cover their foreign currency requirements. Today travellers cheques aren’t widely accepted and are largely shunned by tourists in favour of using bank cards. Most people simply withdraw cash from the ATM abroad using their standard debit card which isn’t necessarily a good move. It’s important to understand that different terms are applied to the wide range of debit and credit cards by the different banks so it’s important to find out what fees will be applied when these cards are used abroad. It’s also a good idea to get hold of a currency card which you can load up before travelling and enjoy relatively low withdrawal fees and the security of not carrying bundles of cash.

The wise tourist can make substantial savings when buying Euros by carefully looking into what it costs to use their bank cards abroad and understanding when to use and not to use their cards. Before looking into the world of bank cards abroad let’s work out where’s the best place to get hold of some Euros in cash before you travel.

Ordering Foreign Exchange in Cash

You’ll almost certainly want to carry some foreign currency with you when you travel but not too much for security reasons. Holidaymakers used to order their foreign currency from their travel agent for which they were charged a commission. Banks soon got in on the act and offered foreign exchange services again charging a commission on transactions. Then some smart cookie came up with the idea of “Commission Free” exchange rates. Look carefully and you’ll soon work out that the currency dealers can only offer these “commission free” deals by offering poorer exchange rates instead. Your job as a consumer is to find which of these currency dealers offers you the best rate with zero commission.

When currency dealers charge a commission it is clearly stated as a percentage fee whereas earning their fee by hiding it in the exchange rate is much harder to detect. To avoid any confusion when shopping around simply asking the question: “How many Euros will you give me for £500?” (or whatever the amount you wish to exchange). This prevents you having to concern yourself with comparing fees and exchange rates.

The modern day foreign exchange market is highly competitive where not only high street travel agents and banks ply for your trade but they are also joined by various online financial service providers, the Post Office and even Marks and Spencer. You can save a lot of holiday money by making wise decisions about where to buy foreign currency so don’t leave it until the last minute and swap all your Pounds at the airport as rates there are often the worst on the market.

The main places in the offline world to check exchange rates are:

  • The Post Office
  • Marks and Spencer
  • High Street Banks

Rather than visit each of these places individually you can check the following websites which tell you exactly what amount of foreign currency you’ll get for your money from different suppliers:

  • Compareholidaymoney.com
  • Moneysavingexpert.com

Check Rates at Travelex

In the online world it’s well worth checking out rates at Travelex who guarantee to beat some of the above dealers and show comparable rates on their homepage. They will deliver currencies to your home without a delivery charge provided you order at least £500 or you can arrange to collect your foreign cash at the airport of your choice. Please note that the rate they offer online is not the same as the rate they offer at their offices at the airport which is far worse.

Paying for your Foreign Currency

Once you’ve sourced your preferred foreign exchange supplier you’ll need to order your currency and pay for it (Euros are often available on the spot). The best way to pay for the currency is with cash (not an option online) to ensure that you aren’t charged any hidden fees as some credit card companies charge their standard fee for cash withdrawals when purchasing currency. Debit cards aren’t so mercenary but if in doubt withdraw the cash from an ATM with your debit card then buy the currency with cash. This scenario doesn’t apply when using a Marks and Spencer credit card at one of their stores. Buying with this card is free of foreign exchange fees and adds points to your rewards account. You’ll need to check to see how their exchange rate compares with other providers.

When’s the Best Time to Buy Euros?

The Pound is a floating exchange which means that its value is determined by market demand and supply. Find out the exchange rate today and get used to keeping an eye on it. This way you’ll know when there’s been any significant change in its value. If you see that the Pound’s suddenly gained against the Euro why not go out and buy some Euros ready for your holidays even if it’s months before you’ll be travelling. But don’t get carried away, just because the Pound rises doesn’t mean it won’t rise further. On the other hand if the Pound falls in value it might still fall further. You’ll never get the “best” exchange rate every time you go on holiday so don’t get too hung up on the foreign exchange market.

Using Bank Cards Abroad

You should carry three different cards with you when travelling in Europe: a credit card, a debit card and a currency card. An informed traveller using them correctly will pay an awful lot less in commission and will get a better exchange rate than someone who pays no attention to what cards they carry and when they use them.

Using Credit Cards in Spain

Making Cash Withdrawals Abroad:

Using a credit card to withdraw cash from an ATM abroad is a very bad idea because most credit card companies will impose two charges on the withdrawal. First of all they will charge a commission of around 2.5% of the amount withdrawn. Then they will charge interest on the withdrawal even if the credit card bill is paid off in full. The bottom line is that you should never use your credit card for taking out cash.

Paying with your Card Abroad:

Both Visa and Mastercard base their foreign exchange rates on what is known as their “wholesale exchange rate” which will vary slightly between the two financial giants. In case you’re unsure you can check the logo on the front of your card to confirm which network your credit card belongs to. Unfortunately, from the tourist’s point of view you rarely get this exchange rate because your card issuer usually adds a “loading fee” of around 2.75% to the “wholesale exchange rate”. You’ll rarely notice this fee as it’s hidden in the exchange rate.

Which is the Best Credit Card for Travelling Abroad?

All financial institutions operate in highly competitive markets so the best plastic on the market today won’t necessarily be the best tomorrow. The following credit cards are advantageous for use abroad as they don’t charge any “loading fee” which means you’re getting the best possible exchange rate available. However, you must pay off your credit card bill immediately otherwise the interest you’ll pay will far outway any savings on exchange rates.

  • Halifax Clarity
  • Post Office Credit Card
  • Saga Platinum
  • Sainsbury’s Gold

Check the following websites to find out the terms and conditions of each of these cards in more detail and to make sure that you’re getting the best up to date information:

  • Moneysavingexpert.com
  • Moneysupermarket.com

Dynamic Currency Exchange

Sometimes when paying with a credit or debit card abroad you’ll be asked whether you want to be charged in Pounds or Euros. Always choose Euros! This is a terrible scam known as “dynamic currency exchange” which allows overseas retailers to get away with ripping off foreign credit card holders by using a terrible exchange rate. Selecting Euros as the charging currency means that you’ll get the exchange rate used by your UK card issuer which will be a lot better.

Using Debit Cards in Spain

Making Cash Withdrawals Abroad:

It seems to be fairly common knowledge that using a credit card to withdraw cash from an ATM incurs a commission. However, few tourists seem to realise that they’ll often be charged the same commission of around 2.5% for making cash withdrawals abroad with their debit card. When making withdrawals watch out for additional charges added on by the foreign bank and if in doubt cancel the transaction and try the ATM of a different bank as not all of them will add on their own fees.

As mentioned in the box above … Another banking scam to look out for is when a question pops up at the ATM asking you if you want to be charged in Pounds or Euros for your withdrawal. Most unsuspecting tourists have no idea what to select and are most likely to select Pounds as that’s their home currency. This is the wrong answer! Always select Euros as the currency you wish to be charged in as you’ll get a far better exchange rate from your UK card issuer than from the Spanish bank.

To add insult to injury most of the UK’s biggest high street banks also add on an additional charge of around £1.50 every time you withdraw cash from an ATM abroad using your standard debit card. These banks include Halifax, Lloyds, NatWest, RBS and Santander. You can partly avoid this cost by taking out large amounts of cash rather than small amounts but are then faced with the resulting security risk of having large amounts of cash around.

Paying with your Card Abroad:

It may come as a surprise to many tourists that most debit cards used for shopping whilst abroad will incur the same “loading fee” of around 2.75% which applies to credit cards. Again you won’t necessarily notice this fee as it’s hidden within the exchange rate when making purchases.

Which is the Best Debit Card for Travelling Abroad?

There’s little to differentiate one bank’s debit card from another’s with most of the main banks listed earlier imposing similar fees on overseas transactions. Considering the “loading fee” on purchases, the commission on cash withdrawals plus the fixed fee per transaction it’s a far better idea to use one of the recommended credit cards above for making purchases than to use your debit card. In addition, you automatically receive a certain amount of consumer protection when using your credit card which isn’t the case with debit cards.

Euro Currency Cards in Spain

A Euro currency card is a prepaid MasterCard which gives cardholders excellent exchange rates, low cash withdrawal fees and 0% transaction fees for purchases made in Euros. It works by pre-loading it online from either your UK bank account or your Sterling debit or credit card which locks in that day’s exchange rate. The cards can be used for withdrawing cash at ATMs and for making direct purchases anywhere that accepts Mastercard. If you hear on the news of a sudden strengthening of the Pound against the Euro then that would be a good time to order a currency card or load one that you already own.

Companies which issue these cards are fully regulated by the Financial Services Authority and claim that you’ll typically save in the region of 10% on your travel currency and up to 5% on the cost of using UK debit cards. You also have the added security of not having to carry large quantities of cash around.

The Main Euro Currency Cards on the Market are:

FairFX Euro Currency Card

The FairFX Euro Card charges no top-up fee and just €1.50 per cash withdrawal and their minimum load is €10. They have their own very competitive exchange rate. Don’t confuse this with the FairFX Anywhere Card which you can load with Pounds and use in any country at the going exchange rate.

Caxton Currency Card

The Caxton Currency Card doesn’t charge any top-up fee or withdrawal fee outside the UK but their exchange rate isn’t quite as good as the FairFX card. They have a minimum load requirement of €150 on the card.

Travelex Cash Passport

The Travelex Cash Passport charges a 2% top-up fee but no transaction fees abroad. The exchange rate they offer isn’t usually as good as the FairFX or Caxton Currency Cards but is better than most standard credit and debit cards. Its only real advantage over the other two cards is that you can pick one up on the spot at Travelex offices and at certain major travel agencies whereas the other cards need to be ordered online.

Are Travellers’ Cheques Dead?

Strictly speaking they aren’t because many people have been using travellers’ cheques all their lives and are happy to stick with what they know when carrying money abroad. The attraction of travellers’ cheques is that they are a safe way to carry money which can usually be replaced worldwide within 24 hours if they are lost or stolen. Typically travellers’ cheques can be exchanged at banks, hotels and foreign exchange offices as well as at selected shops and restaurants. However, the number of establishments which accept them is steadily decreasing.

Economically travellers’ cheques no longer represent good value for money in the ever more competitive foreign exchange market. The initial exchange rate when purchasing the cheques is rarely the best available, you are then charged around 3% to cash them once you’re abroad. If you try to cash in any that are left over once you get home you are again hit with a significant loss on the exchange rate.

If you still wish to use this outdated form of carrying cash you can buy travellers’ cheques at the Post Office However, you’d be far better off carrying one of the currency cards recommended above as they offer all the security advantages of travellers’ cheques but with less fees.

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19 thoughts on “How to Find the Best Foreign Exchange Rate”

  1. Just think that the decision on Euros locally in Spain etc. is fine – however folk need to be extra careful at the airport too if using a card to purchase goods as this can result in a massive difference in the final cost. Again Euros would be appropriate as the ‘duty free’operator will cream off a massive loading on purchases of spirits and other gifts on the way home if you use their exchange rate.

    Reply
  2. Interesting article with good advice. Must have taken a lot of research for all the information you have provided. Thank you!

    Reply
  3. A very good Bureaux De Change for changing GBP to Euro if you work in the the city is city forex ( they have a website to check their daily rates ) do not use the airports Bureauxes, they are a rip off.

    Regards Neil

    Reply
  4. I have found over the past few years that buying currency in advance from Currency Club or ICE gives the best exchange rate, as you say in your article the downside is carrying large amounts of cash.

    Reply
  5. yes good reading, last year i thought i would just withdraw funds when i
    needed it, but that cost me dearly,the banks charge an awful lot each time
    so maybe withdraw a lot in one go and keep it in the hotel safe, or use a company
    called fairfx before you go brillint exchange rates regards john

    Reply
  6. Thank you very much for the information in this article. I found it very useful and it has given me some things to look into. Thanks again.

    Reply
  7. Hi Gerry, very informative article indeed. I especially liked the section on currency cards, an option I have never taken previously but something I will look into further. I usually rely on a combination of mostly cash with the trusty credit card for back up.

    Keep up the excellent work.

    Barry

    Reply
  8. HI Gerry , I have found over 40 years of travelling abroad mainly Spain, that exchanging cash in the resort You can get a better exchange (with no exchange fee) then changing cash before I travelling. I have a Santander Zero card but I have been informed that these may not be no longer available ?

    Keep up the info

    Frank

    Reply
  9. Really good information. Going to Spain for a month later in the year and have been thinking about the best way to take money. This will really help me. Don’t want to take too many euros and maybe lose them or have them stolen. Pre paid card seems the way to go. Thanks very much.

    Reply
  10. Hi Gerry,

    Some very handy info attached, we are getting ready for our annual 2 weeks in Spain during May, and then to Tenerife during August, and this has been very useful. It seems you can be an experienced traveller but theres always someone out there who can give you valuable tips.

    Please keep up the good work as information like this can be passed on to relatives and friends, other items apart from the excahnge rate regading Spain are handy as well.

    Regards,
    Dennis Winchester.

    Reply
  11. Thanks for the information Gerry. I’ve been using a saga platinum card for the last couple of years, No foreign exchange fee just 2% cash withdrawal fee and no interest if you pay it off when you get the bill.
    Cheers,
    Andy

    Reply
  12. I ordered my travel money online a few months ago – I didn’t really want the £500 minimum for free delivery but I have to say it was extremely quick and easy. I seemed to get a good rate here too. http://www.icicibank.co.uk/personal/euros.html

    Like I said, I wouldn’t usually like to take this much cash with me for security reasons. I used my debit card for the rest of the time, admittedly a little naive to the hidden costs. Thanks for the article, will do further research in the future.

    Reply
  13. This is a really informative article. The only thing it doesn’t mention is that some providers offer different exchange rates online and in branches. Better currency rates are generally available online. With Travelex and the Post Office you can get around this by reserving online for branch collection or home delivery.

    Reply
  14. Good afternoon. I always use this website ‘s http://ex-rate.com/, where you can always find out the exact exchange rate for the current day. I recommend it my friends , always accurate and correct predictions.

    Reply

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