Ceri Roberts
Adam French
Holidays are expensive. Even when you’ve booked cheap flights and found a great deal on accommodation, the everyday purchases you don’t think to budget for could add hundreds to your holiday spend.
So how much do we spend when we’re on holiday? Data indicates that UK holidaymakers enjoy an average break of just over a week and typically set a holiday spending budget of up to £60 per day – adding up to £540 over the average 9-day break.
Whether you’re in the habit of spending money on holiday as you do at home or if you resort to grabbing currency at the airport before you board your flight, you’re probably accumulating extra charges that you could easily avoid.
Fortunately, with a little planning, it’s possible to save a significant sum – leaving extra cash to splash on pedalos, paella and piña coladas. Here are some simple do’s and don’ts to help your holiday budget stretch further.
DO: Use a travel credit card
Travel credit cards are designed for spending overseas, which means you’ll benefit from the cheapest exchange rates and may avoid transaction or purchase fees when you use your card in a different country. As well as Section 75 protection for purchases between £100 and £30,000, some travel credit cards also offer cashback rewards – so you can earn a little extra from your holiday spending.
Although travel credit cards are one of the cheapest ways to spend while travelling, paying off the balance as soon as possible is important. Interest rates on these cards are often high, quickly cancelling any savings you’ve made.
If you use a travel credit card to cover a £540 spend on holiday you could save at least £16.20 on transaction fees alone. And that’s before you take into account the potential 50p purchase fee added each time you use your card, or the cash fee (typically around 5% of the transaction) if you use your card to withdraw cash.
Avoiding these fees could cover the cost of your final holiday dinner – or a takeaway when you get home and can’t face the thought of cooking.
DON’T pay avoidable transaction fees
Some banks charge you a fee for overseas transactions, which can cost you up to £1.50, plus a currency conversion fee, every time you use your card – whether in a shop, a cafe, or at an ATM. You could rack up an additional £10 in charges every day of your trip with just a handful of card transactions.
For this reason, it’s worth getting a debit card that won’t charge you for overseas spending, such as Monzo or Chase, which offer fee-free spending and cash withdrawals up to certain limits plus other perks.
Career coach and author Hannah Salton told Nerdwallet: “I regularly use my Monzo card for trips abroad, there are no fees.” She estimates a yearly savings of £50-£100, as her family usually makes about three trips to visit family in Ireland, plus one family holiday abroad in Europe.
Alternatively, avoid transaction fees with a prepaid travel card like the Revolut Travel Money Card. This lets users spend in over 150 different currencies and offers worldwide fee-free spending, plus free cash withdrawals of up to £2,000 per month. The card is free to order and can also be added to a digital wallet, so it’s possible to get one right at the last minute if you forget to order in advance.
Similar prepaid travel money cards are available from the Post Office, which holds 22 different currencies and allows you to make fee-free contactless payments with your card or device in countries where the national currency is the same as the currencies on your card. Otherwise, there is a cross-border fee. Another similar card is the Travelex Travel Money Card, which is a multi-currency prepaid card with locked-in exchange rates for payments and withdrawals. However, you will be charged an inactivity fee if your card isn’t used for 12 months unless you have a zero balance.
Polly Arrowsmith, an accountant who worked in banking and regularly travels for both business and leisure, told Nerdwallet: “I use a prepaid Mastercard from Travelex that I load upfront. I can load it in my home currency and spend it in another. You can easily pre-order this card online and pick it up at the airport. Other pre-paid options are available, with marginally better rates, but you need to allow a few days for these cards to get delivered to you.”
DO Choose the local currency when paying by card
Now this is where things can get confusing. When paying by credit or debit card, you might be asked if you would like to pay in your home currency or the local currency. If you’re given the option, always choose the local currency – not only because you will get a better exchange rate, but also because when you pay in pounds some providers will treat your purchase as a cash advance and charge you accordingly.
Consumer rights expert, Scott Dixon, told NerdWallet: “Dynamic currency conversion (DCC) describes the process by which credit and debit card holders, when making a payment abroad, have the cost of a transaction converted to their home currency at the point of sale. You may or may not be allowed to pay in the local currency or GBP sterling. You will usually be given a worse exchange rate in favour of the retailer if you pay in sterling.”
He added: “Always be on your guard and look out for dynamic currency conversion. Hotels, restaurants and bars will often ask if you would like to pay in your home currency first. Retailers often ask nicely in a way that infers they are doing you a favour by giving you the choice to pay in your home currency. Ask for a corrected bill if you spot that dynamic currency conversion has been applied without your consent.”
DON’T: Exchange currency at the airport
Yes, it’s quick and convenient to exchange money at the airport, but the exchange rates are poor. Instead, it’s best to shop around for the best deal – and pay for it with cash or a debit card, because your credit card provider is likely to treat it as a cash advance, which means you’ll be charged an additional fee.
“I pre-order foreign currency to pick up at the airport and get the best exchange rates,” Arrowsmith said. “If you go to the exchanges without pre-ordering, you can get a poor exchange rate, as they know you will pay over the odds. Allow 10-15 minutes for pick-up at the airport, and be specific about the pick-up location – check-in side or air side.”
Alternatively, order your currency a week or two before your trip and get it delivered to your home, or pick it up locally. You can find much better exchange rates if you’re prepared to shop around before your trip.
Georgia Emm, managing director and founder of Devinci Lifestyle, told Nerdwallet: “It’s always a good idea to have some local currency. I ask clients if they have a Sainsbury’s Nectar card or a Tesco Clubcard,” as these supermarkets offer a better exchange rate to customers who do.
“They also offer a better buy back, should you have some leftover cash that needs changing back on your return.”
As well as the loyalty schemes mentioned above, Asda Rewards customers also receive preferential rates on currency conversion.
Image source: Getty Images
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