Where to get it

Don’t be taken in by the 0% commission and no handling fee advertised by bureau de change, it may be intended to distract you from a very poor exchange rate. In actual fact most foreign currency suppliers will offer you 0% commission anyway, so base your decision on the rate of exchange. By and large do not change money in airports or on ferries as these traditionally offer poor rates of exchange. Do your research before you go and leave sufficient time to order the cash if there aren’t sufficient funds available in the branch.

Most places will also offer you a commission-free ‘buy back scheme’, so when you return you can take back any unused currency. Do bear in mind that you will get a poorer rate than when you first obtained the cash and if it is Euros, it may be worth holding on to – particularly if the recent rises in the value of the Euro are anything to go by.

You can buy cash online, get better exchange rates and next day delivery. Sounds good, but check the postage. It could be as high as £5.00 which will offset the gains made in the rate of exchange.

Buying foreign currency in the UK

Using your credit to get your travel money in the UK may be subject to a cash advance fee, although an increasing number of credit cards are now scrapping this fee. Do check restrictions or minimum term repayment periods if you decide to get your holiday cash on credit. However you pay for your holiday cash, don’t forget ID in the form of a passport or driving licence.

What to buy

The cheapest option is to exchange cash for cash, although carrying around large wads of notes is an obvious risk. Travellers cheques will cut the risk, although there is usually a commission payable in the UK and a local handling fee in the destination country, plus poorer exchange rates than you would otherwise get. Pre-paid cards such as the Post Office’s Travel Money Card are secure and won’t break your budget as they are credited only with the amount of money you choose to put on. However do read the Ts and Cs in terms of transaction fees and cash machine withdrawal fees as these will eat into the amount you have put onto the card.

Using your cards abroad

Using your debit or credit card to pay for foreign goods and services will be subject to an exchange rate fee of around 2.75% of the debt, plus transaction fees of between £2 and £5. So it is not advisable to pay for small amounts on credit or debit card where you could be paying the same amount again in bank charges! In the case of credit cards, the bank charges you pay are offset by the protection you get for sums of money over £100 under S.75 of the Consumer Credit Act. Therefore use it only for large purchases of goods where you can take advantage of this protection should anything go wrong – such as electrical items which could break down.

If you are abroad and you are asked whether you would like to pay for the item in sterling (GBP), decline. Pay in the local currency and you won’t be fleeced by a dodgy local rate of exchange. This is a particular problem in Spain, where ATMs will also try it on – this is called Dynamic Currency Conversion and should be avoided. Simply opt for ‘no’ if a machine prompts you to press ‘yes’ for GBP, you will still get your Euros without getting stung.

Taking a moderate amount of currency and then withdrawing sums with a debit card from local ATMs is a popular and low risk choice for most people, as the exchange rate fees are slightly less for ATMs than for card purchases in shops. However try to make fewer larger withdrawals rather than smaller frequent ones, as you would do in the UK. In addition to the exchange rate fee, banks will charge a transaction fee for every withdrawal, but there is usually an upper limit on the amount that can be charged, so for larger amounts it may be proportionately less. Best to check the Ts and Cs of the bank / card provider before you go to be sure.

Using your credit card to withdraw cash should be avoided where possible. Not only will you be subject to exchange rate and cash advance fees, but you will be charged interest at elevated rates from the moment the cash is withdrawn.