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We all need foreign funds when travelling abroad and the question usually arises as to whether to take cash, travellers cheques or just use cards. The following information may help in allowing you to make the right decisions.
So has foreign currency been sidelined in favour of cards? The answer is generally, yes. If you have the right card you will almost certainly save money when compared to exchanging your Sterling into foreign currency. However, for some, any form of card, whether it is a credit card with charges or the new breed of prepaid cards can be seen as unacceptable and, of course the wrong card can carry risks. Cash is also the easiest to use but, at the same time, is the easiest to lose or have stolen so don't take more than your travel insurance covers. In those cases, exchanging money is probably right for you – but still make sure you're getting the best deal.
Don't assume that a sign saying 'commission free' automatically means you're going to get a great rate. In actual fact you should be very wary of 'commission free' offers because the chances are that you will be offered a worse exchange rate than the bureau itself receives, allowing them to make profit that way. The only way to tell is to ask how many euros/dollars, etc, you will get in exchange for your pounds. Simple as that!
Be wary however, of flat fees and minimum charges. Minimum charges make it difficult to change small amounts of money but flat fees can offer good value if you are changing larger sums of money. Watch out for handling fees too, which are normally about £3 but can be higher. Also consider your own bank or building society as they may have preferential rates for their account holders.
The trusty travellers cheque is certainly one of the most secure methods of carrying your money abroad. Indeed that’s the overriding advantage of travellers cheques because as long as you make a note of the cheque number or make a photocopy (and don't lose that too!) you can travel with peace of mind.
The downside however, is that they're not always the cheapest way to carry your money abroad. In fact expenses can mount up as you are usually charged commission when you buy Sterling cheques and an exchange rate is applied when you exchange them into local currency.
If buying foreign currency travellers cheques think ahead and keep an eye on the exchange rate and look to transfer funds potentially well ahead of time. If you find a good rate, capitalise on it – and if you think the rate is going to drop further then why not play safe and change half your money? Also look out for good deals. Some providers may offer free commission, especially for students.
Deals that don't charge commission won't automatically be the best deals – you have to check their exchange rate and make sure it is competitive. Also be aware that when cashing in cheques abroad you are likely to face an additional charge (normally an extra couple of pounds) – so try and take your cheques in larger amounts, as it will cost the same to cash-in £100 as it will cost to cash-in £10.
Credit and Debit Cards
Many banks now have special travel credit cards purposefully targeting the frequent flyer with points and other loyalty rewards. Whilst these bonuses seem great do check that the fees and the interest rate, especially if you plan to borrow. With that in mind it's often a good idea to have a credit card just for using when overseas – and that can be paid off in full each month.
If using a credit card abroad watch out for immediate interest charges, particularly for cash withdrawals. These incur interest when your balance is not repaid in full. In general it's best to avoid using a credit card to withdraw cash abroad, as you would at home and use a debit card instead
One of the crucial advantages of a credit card is that there are a host of cards with 0% on purchases for as much as 12 months. This will allow you to make purchases without being stung by interest charges - but do be wary to make sure you are not being hit with a loading fee, and make sure there are no restrictions on overseas purchases. Also, the majority of credit card providers will supply a free replacement card. So if you misplace your credit card or it is stolen, contact your credit card company and they will send you a replacement. This offers a level of security that simply isn't available with cash.