Should I order travel money online?
Competitive foreign currency exchange rates, convenience and home delivery are just some of the benefits of ordering foreign currency online. Failsafe, you might think.
There are numerous online companies that offer wide-ranging travel money services with some of the best foreign exchange rates out there, and the majority of these are unlikely to pose any risk to your cash whatsoever.
Ordering your currency online means you can compare travel money rates from a wider range of companies than the high street brands and find cheap deals with ease.
However a number of high profile cases have put an element of doubt into customers' minds. The rates on offer might make a company seem attractive, but it's always worth making sure when you buy travel money that your cash is going to stay safe. Here's how:
Check the company is secure
In recent months, the security of the online travel money industry has been thrust into the spotlight, with the collapse of Crown Currencies leaving many travellers empty handed and out of pocket.
While it can be difficult to predict when any company is facing administration there are some steps you can take to make sure that your money is as safe as possible when ordering your holiday cash online from a travel money exchange.
In the first instance you should check whether the company you plan to use is registered with the Financial Conduct Authority (FCA). You can do this by entering the company details on the FCA register.
However, while FCA registration will confirm whether the company is a legitimate organisation it will offer you little protection beyond that. This is because there are two levels of FCA supervision - registration & authorisation. Foreign money exchange companies don't need to be fully authorised by the FCA to appear on the FCA register.
It is only companies that are authorised by the FCA that have to implement safe guarding measures to protect your money - companies that aren't offer you little protection if something goes wrong.
This was the case with Crown Currencies; it was registered with the FCA as a 'Small Payment Institution' but not authorised by the supervisory body.
As a result, they weren't required to hold their customer's money in a separate bank account to their main business account: when they went into administration, money paid to the company by holiday-makers was lost amongst the company's debt.
They collapsed before they sent out the foreign exchange (forex) they owed to customers, making it much harder for customers to get their money back.
Be warned, foreign exchange transactions are not covered by the Financial Services Compensation Scheme, even when you order your holiday money from a fully regulated bank or building society.
Check your money will be kept safe
To put your mind at rest there are a couple of checks you can do before ordering your currency.
Check a company's registration/authorisation details online by searching on the FCA register.
Check where your funds will be held until you receive your travel money. Ideally this would be in a separate 'client' account.
If you have any doubts about the company and feel that their best foreign exchange rates are too good to be true, your safest bet is simply to stay away.
Sacrificing a few decimal places on your travel money exchange rates for better security could end up being a prudent move if there were any problems with the business further down the line.
Protect your transaction
There are other steps you can take to protect yourself when ordering travel money online. One way is by paying with a credit card - although you are likely to find yourself paying for the extra security.
When you make a transaction worth between £100 and £30,000 on your credit card you'll receive protection from Section 75 of the Consumer Credit Act (read our guide for more information). This means that should anything untoward happen with your order, your credit card company will ensure you are compensated.
Unfortunately, however, most credit card providers class a travel money exchange as cash advance transactions. This means you will not only incur a cash advance fee but are also likely to pay a high interest rate on your borrowing until you pay it off.
You may also be charged by the travel money company themselves for paying by credit cards - meaning if you want to pay by credit card it is vital to hunt for the best rates using a travel money comparison site so you're not short changed.
Alternatively if you can pay using a Visa Debit card you will get protection from the Visa chargeback service if something goes wrong. However, depending on your bank you may be charged a transaction fee of around 1.5 - 2% which could make even the UK's best travel money rates less attractive.
Check your travel money is insured in transit
When ordering all travel money most exchange companies will insure the money until you receive it.
However always make sure to check this is the case, as the last thing you want is for your holiday money to disappear in transit only to find you're not covered!
Most foreign money exchange companies will state on their website if they insure the money to your door, but if you can't find this information contact them to check before placing an order - even if they appear to offer the best buy travel money.
You should also ensure that you know when your holiday money will be delivered and that someone is there to sign for it. Of course to avoid this entirely you can order euro travel money and foreign currency online and arrange to collect it from a local bank or branch in person.
In most cases you can order your money online with few problems and - by using a travel money comparison of commission, rates and fees - get the best travel money exchange rates for your money than you would do buying it in person.
Aside from the collapse of Crown Currencies the online industry has been successful for the most part due to its reduced costs, enabling it to consistently offer travel money best rates that the high street can't compete with. Of course, it is worth remembering that the problems facing online companies are likely to be encountered by more traditional companies as well.
Providing you order with a trusted company you are unlikely to experience any problems, and if you shop around and compare rates along with all associated transaction costs, you are likely to find some of the best deals and rates on the market.
However, if you would prefer not to order your holiday money online then there are some alternatives you can consider.
The first and perhaps most obvious would be to pick up your travel money in person. While you will struggle to match the foreign currency rates offered online for holiday money, shop around and compare holiday money exchange rates of the various banks and currency companies on the high street and you should still find a competitive deal.
Another option to consider is taking a pre-paid card on your travels: many cards will allow you to spend money using the card itself or take cash out while you're away without incurring the same charges as using your credit or debit card. In actual terms this means they can approach the very best foreign exchange rates.
You can compare travel money rates on current prepaid cards on the market by taking a look at our pre-paid cards comparison table.