How to get the best exchange rate for your holiday

According to recent research, the average spend per person on an overseas break is now around £230 more than in 2022. This hike makes finding the best exchange rates for your travel money even more important.

How to get the best exchange rate

It’s notoriously difficult to predict how currencies will perform against one another. They fluctuate depending on several factors, from political announcements to national interest rates. 

For this reason, it’s best to decide how much foreign currency you want and when you want to buy it. When you’re ready, compare the rates offered by different providers to find the best travel money deal.

Watch out for tiered exchange rates 

Some providers offer different exchange rates depending on how much you require. For example, on 20 May 2024, the  Post Office offered the following exchange rates for transferring pounds to euros: 

As you can see, in this case, you get a much better rate just by increasing how much you exchange.

What other travel money costs should you consider?

The exchange rate is the most critical factor when comparing deals. However, the amount of dollars, euros, lira or yen you get for your pound sterling could depend on other factors. When we checked the market in May 2024, we found the following additional costs:

Delivery charges

Delivery charges are unlikely to be an issue if the most competitive seller has a branch near you where you can collect your money. But if you order online or over the phone and opt for delivery, you need to factor in these costs. 

Many providers impose a delivery fee where the transaction's value is below a specific value. For instance, No1 Currency charges £6.95 on currency exchanges worth less than £800, while Asda and the Post Office charge £4.99. If you need your travel money delivered, the only way to tell which provider is cheapest is to compare the total cost.

Additional currency fees

You also need to check for potential fees if you’re buying more than one currency. Some providers add an extra fee if the transaction value of any currencies you buy is below a certain threshold. For example, TravelFX charges £2 per additional currency under £300.

Debit card fees

Using your debit card is arguably the most convenient way to pay for travel money, but some providers charge for this payment method. For example, Sterling FX and the Currency Club add a 0.29% fee for debit card payments. 

In both cases, you can pay via bank transfer. However, this method offers less consumer protection than a debit card transaction.

Credit card fees

Avoid getting travel money with your credit card because card providers typically add a cash advance fee of around 3% on all currency-related transactions. Also, you’ll probably find interest of up to 30% APR is applied immediately.  These charges include buying foreign currency and making cash withdrawals.

What’s the deal with 0% commission?

Money is money. It has no extra benefit other than what it’s worth, so all you need to be concerned with is how much you can get for your outlay. 

You may see some providers heavily promoting 0% commission deals. This shouldn’t impress you, as hardly any sellers charge commission. Instead, they make their money on the exchange rate at which they buy and sell currency. 

Where should you buy travel money?

There’s no shortage of places to get your travel cash. If you have a high street nearby, you’re probably a short walk from at least one of the following:

• Travel agent

• Post Office

• Bank or building society

• Large supermarket or department store 

• Bureau de change

Many of these outlets can exchange money for you. To compare the exchange rates they offer, you need only visit each one. Exchange rates are subject to change, so it’s best to check them all at once rather than over a few hours or days.

At around the same time, search online for the amount you need and compare the exchange rates you find with the best high street options. Note any delivery fees, and opt for collection rather than delivery if this is more convenient. 

What should you avoid when exchanging currency?

The essential advice is to shop around for the best deal. Also, make sure you:

1. Don't buy travel money at the airport or port 

It’s best to avoid buying currency just before you hop on a plane or ferry because you can’t shop around once you’re at the airport or port. The operators of the Bureaux de Change offices at these departure points know this and, therefore, don’t feel the need to offer competitive rates.

2. Don't buy currency at your destination 

The odds are stacked against you chancing on a travel money provider at your destination that offers a superior rate to those available at home. This is because most providers offer better rates for people buying a foreign currency than for those looking to buy back the local currency. Also, who wants to spend time shopping around for currency when they could be lounging by the pool?

3. Don't fall for scams

Whether you buy your currency in the UK or abroad, check the provider is legitimate and not a scammer. This is easier if you’re buying from a well-known provider – although don’t respond to unsolicited emails offering great travel money deals. Likewise, always get currency abroad from renowned providers, such as bank branches. If you don’t, you may end up with an envelope of counterfeit notes. In any case, always count the money before leaving the point of sale, just in case there’s an error.

What are the alternatives to exchanging currency?

While travel money is a must if you’re going abroad, you’ll probably also want to carry a credit card or debit card designed for overseas use. These specialist options won’t attract the fees that apply if you use standard cards abroad.

Standard card fees

The cost of using non-specialist cards abroad may include:

Credit cards

• Foreign currency transaction fees – typically around 2.5% to 3% 

• Cash withdrawal fees – typically from 2.5% to 5%

• Interest – of up to 30% for cash withdrawals and purchases

Debit cards

• Foreign currency transaction fees – typically around 3%

• Foreign currency withdrawal fee – typically around 3%

• Foreign currency cash fee – typically £1.50

Prepaid travel cards are another option if you want to avoid carrying cash. Some cards allow free cash withdrawals and purchases abroad, while others charge up to 6% for transactions, so you need to compare carefully.

Once an essential component of any holiday, traveller’s cheques are increasingly rare due to the widespread acceptance of alternative payment methods. But they are a safe bet as they are issued in your name, and you need to sign for them and show your ID to cash them in.  

Should you pay in the local currency or sterling? 

If the retailer gives you the choice of paying in the local currency or sterling, always pay in the foreign currency. Choosing this option means Visa or Mastercard will use its dynamic currency conversion rate to fix what you pay. On the other hand, if you opt to pay in sterling, the retailer will use their exchange rate and may also impose a handling fee, meaning you’re likely to pay more. 

How to protect your holiday money?

One key benefit of travel insurance is protection against lost or stolen travel money. Levels of cover differ between policies, so consider the amount you’d need to protect.