MAKING sure that you get the best exchange rate for your money can make a big difference to your spending abroad.
Here is when and how to find the best rates to make sure you don’t lose out on any savings.
What is an exchange rate?
An exchange rate is how much your pounds will be worth in a foreign currency.
For instance according to currency exchange site XE, as of today £1 is currently worth 7.26 Turkish Lira.
So, £500 would be worth 3,631 Turkish Lira.
Though XE’s exchange rate is not available to buy as their rates are based on the average of other available rates.
If a currency is strong that means that it is worth a lot compared to other currencies and therefore has a higher value when exchanging for foreign currency.
A currency is weak if it is lower in value than other foreign currencies and gives you a poorer value when you exchange it.
So, as £1 is currently worth 7.26 Turkish Lira the pound is stronger than than the Lira.
The pound is also currently stronger than the euro and dollar, though not by much as £1 is currently worth $1.27 and €1.13.
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When is the best time to buy holiday money?
Exchange rates are constantly changing and can go up and down for a number of reasons.
So to get the best exchange rate for your money you are going to need good timing and a bit of luck.
To give yourself the best chance of getting the top rates for your holiday money you are going to need to be checking exchange rates to keep track of the value of the pound versus other currencies.
A great tool for doing this is XE.com, this website provides live updates on exchange rates to help you monitor how much your money is worth overseas.
Keeping track of these live updates is about being able to spot whether a currency is going up or down in value.
Although this is quite time consuming, if you check currency rates regularly for a week you should start to get an idea whether rates are rising or falling.
If you start checking a month before you want to travel you should be able make a good guess on what the rates are doing at the moment.
For example, if the price of Turkish Lira is going down you might want to buy your holiday money soon to make sure you get as much for your cash as possible.
But if the price of Lira is rising you should probably hold off on buying for a little while to see how high the rates will go and get more for your money.
Andrew Hagger, personal finance expert for Money Comms said: “There isn’t really a right or wrong time, but many people simply don’t have the money available to buy their travel money until a week or two before they jet off.
“Interestingly a recent survey by TotallyMoney.com revealed that 11 per cent buy their currency one month before, 20 per cent two weeks before and 34 per cent one week before setting off on holiday.”
“Four per cent said they buy it on the day which often means buying at the airport and that’s the absolute worst place you can buy it – you could easily get 10 per cent less currency for your money because the exchange rates offered are so poor.”
“For example when I went away recently I got €1.11 to the £1 but at the airport the rate was just 0.95 to the £1 – so avoid buying at the airport unless it is an absolute emergency.”
What about more exotic currencies?
Although it is best to shop around to get the best deals on the big currencies like euros and dollars, the opposite is true for smaller currencies like the Turkish Lira or Crotian Kuna.
The best rates can be found on these smaller currencies once you actually arrive in the country.
It is best to exchange a little in the airport when you arrive and then find a bureau with a good exchange rate later in the holiday.
The pound still holds it value well in countries like Turkey and Croatia so it is best to take some sterling with you to exchange.
What are my other options for spending abroad?
THERE are several specialist cards that can give you a great exchange rate.
These cards include travel credit cards and pre-paid cards which can let you pay abroad without fees or at a set exchange rate.
Travel credit cards: Travel credit cards allow you to spend money abroad without being hit by any fees or hidden charges.
But, they may still charge you for taking cash out.
We reccommend the Halifax’s Clarity Card as it won’t charge you for using it abroad, nor are there any fees for withdrawing cash.
If you do withdraw cash you’ll be charged interest of 18.9 per cent – that works out at about an additional £1.50 for each £100 you withdraw.
But just because you are using plastic abroad it doesn’t mean you don’t have to pay these credit cards off like you normally would.
Always pay off your balance before the end of the month with these cards to make sure that any money you saved isn’t wiped away by paying interest.
For more on travel credit cards you can read our guide here.
Pre-paid cards: An alternative to carrying cash around is to get a pre-paid card.
These cards allow you to put a set amount of cash on the card at a fixed exchange rate.
So if the rate is good at the moment, you can put money on your card and it will stay that rate when you are on holiday.
Just keep in mind that these cards can sometimes have hidden costs and charges so be sure to read the small print.
When is the worst time to buy holiday money?
The worst time to buy holiday money is when you are at the airport.
As airports know that you have nowhere else to go to buy your cash they will give you much worse rates for your money and you will end up losing out.
Emma Grimster from TravelSupermarket said: “By avoiding a last minute dash at the airport, holidaymakers can get the most from their travel money by planning ahead and purchasing their currency online.”
“If you were to leave it until last minute and change your money at a UK airport, we found that the same €2,500 would cost you £2,567.78 at Heathrow’s Travelex store on a walk up rate of 0.9736.”
“This is a difference of £367.27 or 17 per cent vs ordering for delivery with WeSwap.”
“Or if you’d ordered online from Travelex at least four hours in advance, for collection at the airport, you would secure a much better rate of 1.1130 and pay £2,246.18 – £321.60 less!
“But still £45.67 more than ordering for delivery.”
Sell your foreign currency
IF you have any spare foreign currency left over when you get home you can sell it to banks and other travel sites in a buy back scheme
These schemes allow you to sell back your currency for pounds at a different rate to the exchange rates.
Rates change between different providers so make sure to shop around to get the best deal.
MoneySavingExpert’s Travel Max tool allows you to compare buy back rates.
These schemes will often charge you around a £5 buy back fee for the transaction or to pickup the cash from your home so make sure you are trading in enough cash to make this a worth while trade.
You should also always read the small print on these deals as they will often only give you a certain rate up to a certain amount of cash and then you will get a different rate on anything above that amount.
You can avoid paying the buy back fee by holding onto the currency until your next holiday or trying to sell the currency to your friends and family.
Where should I buy my holiday money?
Although it is more convenient to head down to the Post Office or your local bank to exchange your money, you won’t always find the best rate there.
It is always worth shopping around before you head to the local option to see if you can find a better deal elsewhere.
By using MoneySavingExpert’s travel money maximiser tool to compare rates, holidaymakers can save a significant amount.
The tool is free to use and lets you compare rates in your local area.
TravelSupermarket found that ordering €2,500 for a family of four will cost £2,200.51 with WeSwap, including delivery, or as much as £2,296.59 from HSBC (also including delivery).
That’s a difference of £96.08 or 4.37 per cent – the equivalent of throwing away £4.37 in every £100 you change.
You can also get rates from further away from you, for example rates are better in London because bureaus are more competitive with one another.
So you can order from a bureau in London ahead of time and have your money posted to you, although you’ll most likely have to pay for delivery though.
Andrew Hagger said: “Some of the best places to buy currency with decent rates include Debenhams, Tesco and Asda, with many of these shops you can get the holiday cash delivered to your home.”
“Usually it’s free if you order £500 or more (Asda is £600) – for amounts less than that you’ll pay a delivery charge of approx £4 to £5.”
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