Lost in translation with holiday money

Julie Starr says that a little legwork can make a big difference to your spending power abroad

Only when you have got the tickets and the passports ready and your suitcase is packed, do you realise that you need to organise some holiday spending money.

At the most you would need to take with you are a couple of euros, only to cover for the taxi fare to the hotel and maybe a little bit more for you to enjoy yourself on holiday. Anyway, at the very most all you would need would be enough to last you a few days. As carrying lots of money around is not making sense, especially in money belt against the skin in hot climates is not a nice thing to do and also there is the worry that you may get robbed.

On the other hand there are the people that no sooner do they land in there holiday destination, that they are hunting down the airport automatic teller machine (ATM), and then later taking more out when they need to. But why pay more that you need to, just for the convenience point?

In the first place your bank would take commission of nearly 2.75 per cent that is tidied up in the sterling conversion rate; on top of that there is the cash advance fee.

There are some banks, which charge 1.5 per cent (minimum £1.50) for cash advances on credit cards like Nationwide, HSBC and some others. But there are more that charge 2 per cent with a minimum of £2 or £2.50 like Lloyds TSB, Abbey, Alliance & Leicester, Halifax and Barclays. The debit card holders are frequently charged 1.5 per cent.

Also the local bank that is running the ATM may also charge you on top of that as well.

This is why ATMs aboard can be a bit expensive, unless you are withdrawing large amounts, even though it is convenient to get to your money. As an example, if you take out €300 abroad, this is nearly £207 and could cost you roughly £12 or 5.8 per cent of this withdrawal.

On way to get around this is to use your card(s) for meals, larger souvenirs and hotels.

"Quite often it's better value for money to put all the charges when you're abroad on your credit card and just clear it once when you get home," says independent financial adviser Philip Pearson, of P&P Invest in Southampton , "and it's a higher level of security because you're not carrying round cash."

If you are the type of person that is very security conscience, then taking travellers’ cheques is also a good idea. This is because only you can sign them and they can be refunded in the event of loss or theft.

The travellers’ cheques can be cashed at some shops, hotels and exchange booths and banks. In the US they are used as a cash substitute in some places. The only down side is that it is more stuff to keep look after and that there maybe a charge to cash them.

What about buying currency before you travel?

The commission should be taken into account but exchange rates are key, said Mr Pearson. "The exchange rate is the most influential factor," Mr Pearson said. "They make their money off the exchange rate.

"The rates vary tremendously. As an example, in Southampton the Thomas Cook concession within HSBC is more expensive than using Thomas Cook on the high street."

Having said that then you would have to do a lot of legwork to find the best deal. As there are some banks, like Nationwide that do not provide foreign currency in branches, however they do online; banks like Lloyds TSB, provide both and there are others that provide both but charge commission in branches. For example HSBC charges 2 per cent commission on currency bought in their branches but doesn’t charge a commission online.

One of the better companies is Travelex with £200 can buy you $357 or €285 or NZ$505. There are no charges for commission but you need to pay by credit or debit card, this means that you are likely to pay a cash advance fee to the card provider.

The travellers’/money cheques that you can pick up from the airport or port, that are great for some people but is not for others that find it hard to check in on time let and not forgetting doing more errands in the airport. If you are going to somewhere slightly off the map, like Croatia , then you are not in luck, for Travelex do not stock Croatian Kuna.

Then there are the high street deals. Many of which, offer a next-day delivery on order that are placed in the mid-afternoon. Some need you to pay by credit or debit card, though, which means more cash advance fees.

There is a commission-free service with home delivery by Nationwide giving $352, €280 or NZ$490 for £200 this week. But there is a delivery charge of £3.50 and you need to be in to sign for it.

HSBC was paying $355, €280 or NZ$500 for £200 and they also provide a free delivery on orders that have the value of £500 or more; on the smaller order there is a £3.95 handling fee. The delivery is to a home or to a local branch and there is a 0 per cent commission on orders of £100 to £2,000.

At Lloyds TSB there is a commission free deal online, by phone or in their branches. There is free collection from a branch or for home delivery for £4.50. It is paying $355, Barclays also offers commission-free orders, with home delivery, at Halifax there is a commission free service but for home delivery they charge £5, available only on phone and branch orders.

In the middle is the Post Office that pays $352.44, €279.16 or NZ$492.61 for £200 this week.

You can order up to £3.00 online and there is no commission, up to £500 over the phone or buy on the spot at “on demand” branches. The good side to this is that you can pay when you collect from the local branch and use cash or cheque to avoid the card fees.

When your holiday has finished? There are some buyback services. This is so that you can get rid of any unused notes at the going rate instead of what you paid for them.