Make a sterling effort to save on holiday – Jenny Ross

Six in ten Britons took a holiday abroad last year ' the highest figure since 2011 ' but the weaker pound means it's harder to find value for money
Six in ten Britons took a holiday abroad last year ' the highest figure since 2011 ' but the weaker pound means it's harder to find value for money
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There are a range of options to ensure you don’t get stung in the pocket taking out cash abroad, says Which’s Jenny Ross

Amid the ­political and economic upheaval of the past few years, at least one thing has remained constant: our commitment to going on holiday. Six in 10 of us took a break abroad in 2018, according to ABTA – the highest ­figure since 2011.

What has changed, though, is our choice of destination: with the weaker pound ­making foreign trips a pricier prospect, getting value for money is key – hence the growing number of bookings for Turkey, Egypt and Tunisia.

But no matter how carefully you’ve pieced together your trip to ensure you squeeze ­every last drop out of your sterling, you could still lose out if you haven’t given any thought to how you’ll spend while you’re away.

So to kick off the holiday ­season, here’s a round-up of tips to help you get the best deal on travel money, and ­prevent your budget being dented by fees . . .

1. Pick the perfect plastic

The cheapest way to spend money abroad will almost always be on a card. The best cards easily beat exchange rates offered by bureaux de change when you buy ­currency. But it’s not just the exchange rate that matters – you’ll need to watch out for hefty fees on foreign transactions and cash withdrawals.

Debit cards are generally the worst culprit, with some charging a minimum of £1.50 each time you spend or withdraw cash when abroad. There are some exceptions, though: app-based Starling Bank is unique in offering fee-free spending and cash withdrawals worldwide on its debit card, without any limits. Its app-only rival Monzo also gives its customers ­fee-free debit card transactions abroad, but it charges 3 per cent on foreign cash withdrawals above £200 in any one month.

There’s a bigger selection of fee-free credit cards designed for use abroad. Top picks include Barclaycard’s Platinum travel card, Halifax’s Clarity card and Tandem Bank’s card.

A word of warning about withdrawing cash on a credit card: you’ll be charged a ­higher rate of interest compared to normal spending on the card. This interest usually kicks in straight away, unlike other purchases, where you benefit from a grace period of up to 59 days.

Credit card cash withdrawals can also affect your credit rating, as they’re seen by lenders as a sign that you’re in financial difficulty. Given that lenders are more interested in patterns of behaviour than isolated events, taking cash out a couple of times while on holiday is hardly going to scupper future credit applications, but daily trips to the hole in the wall are best avoided.

2. Shop around for currency

There will inevitably be some places that don’t accept card payments, so it’s a good idea to take some cash with you too. But don’t assume your bank – or the Post Office – will offer the best deal on currency.

As with most purchases, it pays to do your research first, so go online to compare exchange rates from different currency providers.

You’ll often be able to get a better deal if you don’t mind having currency delivered. If you want to collect it from the high street, make sure you order online in advance, as most providers offer better rates this way.

But don’t pay for it with a credit card – it’s treated as a cash withdrawal, so will incur fees and interest charges.

Whether you’re looking for dollars, rupees or zloty, planning ahead will give you a much better chance of getting a good deal. Leaving it until the last minute will cost you, as exchange rates at airport bureaux de change are always terrible – in some cases you’ll struggle to get much more than one euro to the pound.

3. Don’t pay in pounds

You might be given the chance to pay a bill or make a cash withdrawal in sterling rather than the local currency when using your card abroad.

This is known as “dynamic currency conversion” (DCC), which makes it sound rather alluring, but don’t be fooled – it’s a rubbish deal. According to currency firm FairFX, UK holidaymakers are losing more than £490m by opting to pay in pounds, as DCC fees can add an average of 7.74 per cent to your transaction.

4. Make sure you’re covered

No matter how savvy you are with your travel money, any savings you make could be instantly wiped out if you jet off without travel insurance.

Falling ill while you’re abroad could leave you thousands of pounds out of pocket if you’re uninsured, yet nearly two-fifths of holidaymakers going abroad this summer haven’t taken out a policy for their trip, according to ABTA.

The trade association found that among those who have incurred additional costs on holiday as a result of being uninsured or not having the right cover, more than a third have had to shell out between £500 and £4,000.

It’s best to take out a policy as soon as you’ve booked your trip to make sure you’re covered for anything that might cause you to cancel your plans. A European Health Insurance card isn’t a substitute for a travel insurance policy, as it doesn’t cover everything.

Annual cover is usually the most cost-effective option if you’re making more than two trips in the next 12 months, while a joint policy tends to work out cheapest for couples. You face higher premiums if you have an existing medical condition, but it’s vital that you disclose this to the insurer, otherwise subsequent claims could be rejected. The same applies to any changes in your health after you’ve taken out a policy.

Jenny Ross is the Which? ­Money editor